Lack of clarity about the most effective role for the state in economic growth is the biggest challenge to the international community’s commitment to delivering the Millennium Development Goals (MDGs) by 2015. Governance – the outcome of politics and history – is central to economic growth in developing countries. Yet a better general governance context does not boost growth in the short-term, and basic principles such as transparency or accountability do not translate into any single ‘essential’ institutional arrangement for growth. Growth strategies and reforms in the investment climate in developing countries currently confront disconcerting uncertainty about what aspects of governance are really crucial for delivering economic growth, and too often ignore the importance for improving ‘non-market’ governance on which sustainable economic growth for poverty reduction depends.
Stimulating and sustaining economic growth may have different governance requirements. State-led development has been highly effective under both authoritarian and democratic systems, but nothing is worse for sustainable economic growth than state-led development led by an anti-developmental state. In all contexts ‘governance for growth’ requires effective political leadership, shared vision and a sense of national purpose, from which the technical capacities of a government to support growth dynamics can emerge.
The UK and Japan’s development communities are particularly well placed to collaborate on improving ‘governance for growth’: from different historical paths to better governance for sustained growth, these two industrialised countries offer complimentary experience and expertise on Africa and on Asia, and share a strong common commitment to improving aid effectiveness.