Trust is the foundation of development

Trust is the foundation of development

Today, the most important problem both in Turkey and in the world is how to increase economic growth and quality of life. I would argue that there is an answer: Good governance.

The essence of good governance is ensuring trustworthy relations between institutions and their stakeholders, regardless of the institution type, public, private or non-governmental. Uncertainty and lack of trust between parties gets reflected in the pricing of transactions between them. This in turn increases the costs of doing business and cost of living. Whenever the trust level decreases, people will earn less, get less for the money they spend and have a lower level of quality of life. Therefore, if we wish to improve the growth rate of our economy, first we need to improve the governance in our institutions.

Businesses need stable, transparent, predictable and efficient policy environments and legal frameworks, as well as consistent implementation. The elimination of unnecessary legislative, regulatory and administrative barriers represents the right and most cost-efficient economic stimulus available to governments today. 

An inclusive society is a society that overrides differences of race, gender, class, generation, belief and geography. Stakeholder engagement and creating equal opportunities in public and private institutions for all are foundation stones of building inclusive societies.

A sustainable global economy is one that combines responsible behavior, social justice and environmental care with long-term profitability. Sustainability is about seeking to improve the quality of human life while protecting the potential of future generations to do the same. This requires not only a strong culture of responsibility, but also an appropriate climate in which good governance is exercised in all institutions, including public, private and civil society organizations. 

Public policies and regulations aim to establish standards and limits to individual behaviors, but also a fair playground to motivate individuals and companies to innovate and improve their quality of life. Governments regulate economic activity to shape conduct when markets cannot function to enable efficient resource allocation, with the intention to prescribe or proscribe conduct, calibrate incentives or change preferences.

Value creation requires investments for an uncertain future. The more the governments and their actions are predictable, the more the investments would be as the risk premiums would decline. Therefore, rule of law, public engagement, evidence-based public decision making and fair implementation of regulations across players are the keys for governments to improve the business investment appetite. 

Therefore, policymakers should explicitly recognize that productive societies and strong economic growth are fundamental for inclusive growth. Inclusive growth requires improving employment opportunities to all segments of the society, providing an environment whereby affordable products are available for all, and an enabling environment for all to have access to both public services and to be able to contribute to public decision making.

Stakeholder engagement is a pillar of sound, evidence-based reform and public institutions should not work in isolation. Governments, businesses and civil society organizations should work together to reestablish trust among stakeholders. Effective consultations and well-conducted impact assessments contribute to improve the design of effective regulations. The private sector can play a very positive role in the analysis of existing regulations, the assessment of relevant measures and as a key provider of expert advice. These are drivers for stakeholder buy-in and commitment in the implementation of regulations and contribute to the efficient monitoring of regulatory practices.

Better and fair implementation of proposed reforms would be stimulated by enhancing the effectiveness of regulatory consultation processes and impact assessments as they contribute to improve the design of new regulations, to minimize enforcement and compliance costs and help ensure key stakeholders support their implementation. In order to increase the quality of consultations, many governments need to allow greater time for consultation. They need to explain how the information provided during consultations will be used and to make documents for consultation more easily accessible. In particular, tools such as socio-economic development maps, public expenditure analyses and public service satisfaction surveys provide objective input into public consultations and improve the quality of the consultation process.

Another important factor for ensuring the successful introduction of new reforms is to carry out ex-ante and ex-post regulatory impact assessments (RIAs), social impact assessments (SIAs) and environmental impact assessments (EIAs) in order to improve learning. Unfortunately, experience shows that there is a tendency to utilize such studies as legitimization of political decisions once they are made, rather than as inputs into the real decision-making processes.

Good governance is the key for inclusiveness, increasing growth and improving quality of life. 

Therefore, governments need to focus on creating a regulatory environment where transparency in the public and private sectors is the norm in order to build trust and achieve inclusive and sustainable development. 

*Dr. Yılmaz Argüden is the chairman of ARGE Consulting and the founder of non-profit Argüden Governance Academy operating under the aegis of the Boğaziçi University Foundation.