The World Bank headquarters.
ZIMBABWE has the lowest commitment when it comes to protection of property rights, contract enforcement and lack of arbitrary expropriation without proper compensation, a World Bank report has said.
As a result, the report established that Zimbabwe (denoted by the acronym “ZWE” on the graph below), is also a high shadow economy compared to other measured countries in the world.
The Bank defines a shadow economy as the share of the market-based legal production of goods and services that is deliberately concealed from public authorities for the purposes of avoiding payment of taxes, avoid payment of social security contributions, avoid having to meet legal labour market standards and avoid complying with certain administrative procedures.
The report, titled World Development Report: Governance and the Law, urges developing countries and international development agencies to rethink their approach to governance, as a key to overcoming challenges related to security, growth, and equity.
“Confronting the challenges faced by today’s developing countries – poor service delivery, violence, slowing growth, corruption, and the ‘natural resource curse,’ to name a few – requires rethinking the process by which state and non-state actors interact to design and implement policies”, the report says.
It also notes that when policies and technical solutions fail to achieve intended outcomes, institutions often take the blame. However, it finds that countries and donors need to think more broadly to improve governance so that policies succeed. It defines better governance as the process through which state and non-state groups interact to design and implement policies, working within a set of formal and informal rules that are shaped by power.
The report finds that good policies are often difficult to introduce and implement because certain groups in society who gain from the status quo may be powerful enough to resist the reforms that are needed to break the political equilibrium.
Zimbabwe’s short and medium term policies such as Zim-Asset, National Trade Policy and the Industrialisation Policy, have been failing to meet their fundamental targets.
“Decision makers – the elite – may have the right objectives and yet still be unable to implement the right policies because doing so would challenge the existing equilibrium – and the current balance of power”, says the report.
Commitment, coordination and cooperation were identified by the report as the three core functions of institutions that are needed to ensure that rules and resources yield the desired outcomes. The report further argues that the effectiveness of policies to achieve equitable development is related to how well institutions perform certain key functions. It further opined that policies that require long-term commitment are often truncated, which is a sign of commitment failure.
“When the commitment to deliver on policies, such as the provision of quality services, breaks down, individuals tend to opt out and demonstrate less cooperation in their willingness to pay. Effective policies tend to have long-term objectives, matching resources, and well-aligned incentives for the actors involved. Actors must trust that promises will be kept, even in the face of changing circumstances”, the report says. FinX
