“Well governed”: the EBRD’s transition concept

By Milica Delevic

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One of the important lessons of the EBRD’s first 25 years was that transition is not just about building markets and the private sector. It is also about improving the quality of both state and private sector institutions and ensuring that they work well together.

This understanding has resulted in a renewed emphasis on the EBRD’s work on governance – not least by the establishment of the Investment Climate and Governance Initiative in 2014 – and  also helped shape the definition of “well governed” in the context of the Transition Concept Review. 

How we assess progress on transition qualities

There is a variety of definitions of both governance and “good governance” in academic literature and the IFI world. Most of them, however, have two key concepts in common – the institutions and processes that these institutions employ.

The Government of Ukraine - with the support of international donors, the EBRD and the EU - is strengthening its drive to #MakeReformsHappen.

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The EBRD’s concept of “well governed” fully reflects the trend: “Governance concerns authority, decision-making and accountability in all domains. At its core, governance is about the quality of institutions and the processes that they support.” 

To ensure that the concept is aligned with the EBRD’s mandate, two key pillars are introduced. One is the notion of national or subnational economic governance, which refers to the institutions and processes that support economic activity and economic transactions on state-wide or subnational levels.

The other is corporate-level governance, which relates to the system of rules, practices and processes by which companies are directed and controlled. While the latter has already been mainstreamed into the EBRD’s work, the former still offers considerable potential to be further developed in future project and policy work.

Recognising that poor governance can contribute to countries being “stuck in transition” might be easier than finding ways to assess challenges and incentivise a combination of projects and policy dialogue that can help countries back onto the path of success.

A large part of the current work is related precisely to that - translating the concept into a set of indicators that will be used for the assessment of transition challenges (ATC), measuring the status of transition in our countries, the country strategies, the country diagnostics and the results management.

For national and subnational governance, the key indicators centre on the quality of institutions, integrity standards and the control of corruption as well as the rule of law. At the corporate level, the focus is on the key concepts of corporate governance as well as other integrity- and governance-related standards relevant for corporates.

The combination of these two dimensions will make it possible to build on the good work the EBRD has been doing for many years on legal reform, public procurement, and integrity standards - but also to do more to help shape the agenda for private sector development in our countries of operation by encouraging public-private dialogue and helping governments develop and implement relevant reforms aimed at addressing institutional and structural challenges faced by their countries.

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