Globalization and State capacity in the Asia-Pacific region

 
  • Executing agency: UN/DESA Division for Public Economics and Public Administration
  • Start date: 1 March 2002
  • End date: 1 April 2004
  • Partners: UNDP Regional Bureau for Asia-Pacific
  • Total budget: USD 100,000

Project coordinators: Jacinto De Vera, Senior Public Finance Office; Adriana Alberti, Public Administration Officer

Brief description: Transparency and accountability in the public sector and the reform of judicial and regulatory systems are necessary to effectively meet the challenges of globalization -promoting trade and investment, improving access to information technology, and protecting the interests of the poor and vulnerable groups. The objective of this STS project is to undertake a study on state capacity in the Asia-Pacific Region and provide substantive inputs to the Regional Human Development Report regional initiative. The findings of the study are to be presented to the Regional Seminar on State Capacity and Globalization.

I. Background

Globalization is a dominant force in the 21st century. It is shaping a new era of interaction - and interdependence - among nations, economies and people. Command economies of the past have been transformed into market-oriented economies. Integration is taking place not only in the economic sphere, but also in the areas of technology and governance. New technologies are developing rapidly. Knowledge based industries and skills are growing in importance. The world economy is being increasingly integrated through an accelerated pace of trade and investment. Though globalization is not a new phenomenon, the present era is resulting in profound and far reaching changes in new markets (foreign exchange and capital markets linked globally), new tools (such as internet links and media networks), new actors (such as The World Trade Organization and networks of global NGOs), and new rules (including multi-lateral agreements on trade and intellectual property).

The Changing Role of the State and State Capacity

It is increasingly being acknowledged that the State is a key actor in the development process. It has a major role to play in making globalization work for all; alleviating poverty and income inequality; in advancing human rights and democracy; in protecting the environment and promoting sustainable development. One of the main conclusions, which can be extrapolated from the United Nations Millennium Declaration is that reinforcing state capacity and promoting good governance is a paramount factor in implementing the Millennium Declaration Goals.

How the public sector is structured, how it is administered and how it operates, as well as the policies that are pursued have a great impact on people's well being. Managing the public sector in today's environment of constant change, particularly in view of globalization, has become an increasingly demanding challenge for national decision makers, policy advisors, service delivery managers and civil servants at large. Reforming public administration systems and strengthening state institutions are key factors in order to enable people to seize the opportunities of globalization. Unfortunately, globalization has benefited only a relatively small number of countries and some regions of the world are still not integrated into the world economy. Even in countries that may have significant advances due to globalization, there are huge disparities in the distribution of its benefits.

The role of the State is changing in many ways, in part as a response to greater economic integration. In the past years there has been a shift from control-oriented to "steering role"; shift from direct production of goods and services to strategic planning and an "enabling" environment; shift from government to governance with active participation of the civil society and the private sector; focus on the protection of public goods including the environment and human rights; increased focus on the issues of global governance; and matching the capability of the State to its role.

The reasons for an inequitable distribution of benefits of globalization vary from region to region and from one country to another. One factor, however, is constant - state capacity is a necessary condition to make use of opportunities provided by globalization and to protect and promote interests of vulnerable groups in the society. The State plays a major role in alleviating poverty, protecting the environment, and promoting human rights. Furthermore, it is essential for effectively managing violent conflicts, combating crime and for ensuring increasing gender equity and the advancement of women.

Reinforcing state capacity to cope with the challenges of globalization is necessary in a number of areas:
∑ New frameworks and tools for political, administrative and financial transparency and accountability including institutions and conventions against cross-border corruption, and measures to combat domestic corruption;
∑ Human resource development with emphasis on capacity and new skills of public servants in such areas as trade negotiations, regional treaties, policy analysis to assess impact of globalization on the vulnerable groups and public goods;
∑ Legal, judicial and regulatory frameworks for trade and investments including the protection of property rights and access to justice for the poor;
∑ Capacity to assess the social and economic impacts of liberalization of trade and investment policies;
∑ State capacity to negotiate with the WTO, regional organizations and other trade agreements as well as capacity to assess their impact on human rights and environmental protection;
∑ Mechanisms and frameworks for establishing partnerships among the public sector, the civil society and the private sector; and
∑ Access to and use of information technology in government - e-government as a tool to achieve a variety of ends.

II. Strategy and Objectives

Focus of the Regional Report

As part of UNDPís new initiative on Regional Human Development Reports in Asia and the Pacific, this regional report will attempt to examine regional and country level experiences and practices related to two inter-twined aspects of state capacity and globalization. It will focus on tools and frameworks of accountability and transparency, as well as judicial reforms and regulatory frameworks to cope with rapid globalization in a manner that promotes trade, investment and access to information technology, whilst protecting the interests of poor and vulnerable groups. More specifically, the objectives of this regional report are to:

∑ examine the relationship between the aforementioned two aspects of state capacity and the ability of the countries to promote trade, investment and information technology without a negative impact on human development;
∑ review experiences and good practices at the country and regional levels with regard to the government responses to globalization including trade, investment, and developing countriesí positions in regional and global fora;
∑ provide a forum for the sharing of knowledge and experience among selected institutions in the region;
∑ forge partnerships and twinning arrangements between the national and regional institutions involved in the programme and one of the leading institutions in the North involved in research and policy advice in this field;
∑ share related global knowledge and experience available in the United Nations Department of Economic and Social Affairs with the participating institutions in developing countries; and
∑ provide substantive inputs to the country, sub-regional and regional level human development reports.

Corruption lowers investment, decreases efficiency and acts as an additional tax on business. Furthermore it misallocates resources by diverting these to private pockets and reduces expenditure for development projects and social safety nets. It renders government regulations ineffective because of non-compliance with the requirements for public health and safety, disregard for regulations and penalties for environmental pollution. The above aspects of corruption lead to less competitiveness of the economy. Though East Asia is often cited as an example to show how high level of corruption and impressive growth rates can take place at the same time, the recent experience suggests that reducing corruption and inside dealings would have further improved the performance and sustainability of the East Asian economies.

The poor suffer from corruption in many ways. Because of their low ability to pay, the poor suffer the most in an illegal price system, receiving a lower level of such services as public housing, education and health. Corruption in state regulatory and taxing apparatus reduces revenue and severely impedes the growth of indigenous, small scale enterprises in towns and cities.

To benefit from the global economy and increase foreign investment, the role of the judiciary as the guardian of the rule of law is critical. A country should have an effective and efficient legal and judicial system through which investors are able to get justice in the courts; contracts and property rights are protected and enforced, and the poor and vulnerable groups have access to justice

III. Activities and Outputs

In close consultation with UNDP Asia-Pacific Bureau, DESA proposes to select six countries for study. The criteria for choosing are to sample countries reflecting:

∑ Sub-regional, linguistic and administrative diversity;
∑ political stability;
∑ Commitment or interest by the leadership in improving transparency and accountability in the public sector, as well as the judiciary; and
∑ Existing partners with whom DESA and UNDP Asia-Pacific Bureau have worked successfully in the past.

In light of the above, DESA proposes to prepare a substantive input and synthesis report that would be used in a number of relevant Regional Human Development Reports and workshops. UNDESA will be responsible for the management of the substantive and operational aspects of this specific report, under the regional project. HDRC/UNDP India, as the host for the regional project, will be fully involved in appraising the content and in ensuring quality and policy consistency, as per their role with other regional HDRs. Further, DESA will select, in consultation with UNDP Asia-Pacific Bureau, and use the services of a number of international experts who have a proven substantive background and research experience to work with its team to:

Step 1: Prepare a conceptual framework and outline

During this phase, a conceptual framework and chapter outline will be prepared in addition to the identification of topics for analytical studies and country case studies. Formats for analytical papers and country case studies will also be prepared.

Step 2: Prepare six case studies

DESA will identify leading experts, draft the terms of reference for and commission technical papers on key public sector institutions for State capacity in meeting the challenges of globalization and on priority issues in promoting transparency and accountability among them. Two case studies in each of three sub-regions of Asia-Pacific (East Asia, South Asia, and Southeast Asia,) will be prepared by national training and research institutions. Analytical papers will be prepared by global or regional level institutions. As a follow-up at the country level, national seminars could be organised through the lead national institutions to be involved in the production of the report. The report could also provide the basis for the preparation of National HDRs on this topic. However, such follow-up actions would have to be funded through other sources, and is not covered by this project.

Step 3: Organize a senior level policy workshop in Asia

The fourth phase will consist of a senior level policy workshop in the region.

Step 4: Produce a synthesis report for the Regional Human Development Reports

Based on the papers and information submitted by the national consultants, DESA will prepare a report. It will be composed of a synthesis of regional trends, developments, and needs and edited country case studies. Where useful and appropriate, the report will incorporate findings of the literature survey that either corroborate or contradict this studyís findings.

Step 5: Dissemination of the results

DESA and UNDP Asia-Pacific Bureau will identify opportunities to organize national workshops to disseminate the study findings and to encourage their incorporation into national policies and programmes. Some of these dissemination activities may be contingent on finding additional resource.

RAS/01/061/A/09/01: Regional Initiative on HDRs in Asia and the Pacific - Globalization and State Capacity

Terms of Reference of National Case Studies

It is increasingly being acknowledged that the State is a key actor in the development process. It has a major role to play in making globalization work for all; alleviating poverty and income inequality; in advancing human rights and democracy; in protecting the environment and promoting sustainable development. One of the main conclusions, which can be extrapolated from the United Nations Millennium Declaration is that reinforcing state capacity and promoting good governance is a paramount factor in implementing the Millennium Declaration Goals.

How the public sector is structured, how it is administered and how it operates, as well as the policies that are pursued have a great impact on people's well being. Managing the public sector in today's environment of constant change, particularly in view of globalization, has become an increasingly demanding challenge for national decision makers, policy advisors, service delivery managers and civil servants at large. Reforming public administration systems and strengthening state institutions are key factors in order to enable people to seize the opportunities of globalization. Unfortunately, globalization has benefited only a relatively small number of countries and some regions of the world are still not integrated into the world economy. Even in countries that may have significant advances due to globalization, there are huge disparities in the distribution of its benefits.

Experience has shown that States with effective public administration systems and strong institutions have the capacity to channel globalization to their own advantage and to minimize its costs. Without building strong institutions and effective regulatory frameworks at the national level, including independent and effective judiciaries, strong parliaments, accountable executives, mechanisms of transparency and accountability, and without adequate social policies, including those on health, education, and social security systems, there are too many risks that either a country will be marginalized or it will not be able to shield the most vulnerable groups of society from the negative effects of globalization.

Trade and foreign direct investment promise a number of benefits to both developed and developing countries. Free trade promotes specialization among different regions, allowing them to apply their own comparative advantages. It also expands the consumption opportunities of countries by allowing the efficient interchange of goods and services. Free trade provides opportunities for developing countries in that it opens new markets for export and attracts foreign capital, which aids development. Foreign direct investment can lead to a transfer of technologies and know-how, increasing domestic productivity and employment levels. Both trade and investment are conducive, especially in the long run, to economic growth.

In light of the above, one of the outputs of this Project is a regional report centred on regional and country-level experiences and practices related to state capacity and globalization. The report will focus on three dimensions of state capacity that contribute to the promotion of trade and investment: (a) administrative capacity of the State, (b) systems of transparency and accountability, and (c) legal and judicial frameworks. For this purpose, six national case studies will be commissioned in the following countries: Bangladesh, China, India, Indonesia, Mongolia and the Philippines. The results of these national case studies will form the basis of the regional report.

Each national case study will address the following topics (this is not intended to be an exhaustive list):

1. Administrative capacity of the State in promoting trade and investment:

(a) Leadership and strategic planning capacities;
(b) Human resources development, including negotiating skills required to effectively participate in multi-lateral agreements and regional treaties; policy analysis capacity
(c)Performance standards for management development
(d) Public service professionalism
(e) Information technology in government operations
(f) Existence of Investment Councils (like in Japan)

2. Transparency and accountability in trade and investment activities:

(a) Anti-corruption laws
(b) Conventions against cross-border corruption
(c) Agencies and/or institutions
(d) Enforcement mechanisms

3. Legal and judicial framework:

(a) Regulatory framework for trade and investment
(b) Property rights laws
(c) Mechanisms to protect property rights
(d) Independence of the judiciary
1.Training and recruitment process
2. Appointment and term in office
3. Codes of Ethics

It would also be useful to provide some information on the overall structure and mechanisms of access to justice for the poor (for example, public legal assistance). The final outline will be discussed with each identified national consultant by DESA prior to the preparation of the study. Consultants will be given six months to prepare their respective studies with the first draft (in electronic form - PC version of Microsoft Word) to be submitted at the end of the fourth month of the contract. The paper should be between 20 and 30 pages at 1.5 line spacing, excluding tables and graphs. Depending on the availability of funds, each consultant will present his/her own findings at a Senior Policy Workshop in the region, which will be jointly organized by DESA and UNDP, and is tentatively scheduled for February-March 2003. Each of the national case studies will become the property of the Project.