4. A governance deficit as the common denominator of stagnant development in MENA

customers to pay for water. In digital technologies, strengthening consumer protection in e-commerce transactions and improving data governance could increase citizens’ trust in digital payments and, thus, accelerate their uptake. As such, better governance has the potential to foster inclusive, accelerated, yet sustainable, development for the region.

Part II is structured as follows. It opens with four essays that touch on cross-cutting issues. Hoda Assem examines measured accountability across regions and within MENA. Johannes Hoogeveen documents the current lack of data and access to data in the region, together with the great benefits that might accrue to countries with more transparency. Sergio de Cosmos and coauthors reflect on the preconditions for transitioning out of fragility and conflict in the region, based on their work on the Building for Peace project. Daniel Li Chen and Manuel Ramos Maqueda assess the centrality of a well-working justice system to good governance and to improving incentives for investment and growth.

Part II then examines essential elements of economic development across different sectors of the economy: human capital, itself a core pillar of growth, with contributions by Robert Prouty on the central role of governance in improving learning; Asif Islam and Federica Saliola on the importance of rethinking the role of the state to promote a dynamic private sector and, with it, robust job growth; Nelly Elmallakh on the benefits of well managed migration processes. It then moves to exploring how better governance can help manage the natural capital of the region—land and water. Technological change is the key engine of long-run productivity growth, and digital advances are an important part of it. Christina Wood discusses how good governance’s complements—such as data privacy and consumer protection—are needed if digital payments are to take off fully in the region. Separate contributions from Ha Nguyen and Rana Lotfi and from Somik Lall discuss the role of accountability and decentralization in two complementary aspects of effective fiscal policy: as a tool to smooth consumption over time, looking into fiscal policy countercyclicality, and as an instrument to redistribute across space, focusing on fiscal transfers.

The remainder of this introductory chapter to Part II will discuss some of the key literature on the role of governance in economic development. It will then weave in the common themes that emerge from the cross-cutting and sector-specific contributions to this volume.

4. A governance deficit as the common denominator of stagnant development in MENA

What is Governance and Why Does It Matter?

There are many definitions of governance. The one put forth by the Oxford Handbook of Governance is particularly useful because of its discipline and comprehensiveness: “Governance…has at least four meanings in the literature: a structure, a process, a mechanism, and a strategy. As a structure, governance signifies the architecture of formal and informal institutions; as a process, it signifies the dynamics and steering functions involved in lengthy never-ending processes of policymaking; as a mechanism, it signifies institutional procedures of decision-making, of compliance and of control (or instruments); finally, as a strategy, it signifies the actors’ efforts to govern and manipulate the design of institutions and mechanisms in order to shape choice and preferences.” Under the umbrella of this comprehensive definition are the laws, regulations, judicial decisions and administrative practices (the “structures”); the practices of governing and exercising power (the “processes”); the institutionalization of decision making (the “mechanisms”), and the very design, creation and adaptation of governance systems (the “strategy”) (Levi-Faur 2012).