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The terms governance and good governance are increasingly being used in development literature. Governance describes the process of decision-making and the process by which decisions are implemented (or not implemented). Hereby, public institutions conduct public affairs, manage public resources, and guarantee the realization of human rights. Good governance accomplishes this in a manner essentially free of abuse and corruption, and with due regard for the rule of law.

Good governance defines an ideal which is difficult to achieve in its totality. However, to ensure sustainable human development, actions must be taken to work towards this ideal. Major donors and international financial institutions, like the IMF or World Bank, are increasingly basing their aid and loans on the condition that reforms ensuring good governance are undertaken.

Good governance can be understood as a set of 8 major characteristics:

• participation,
• rule of law,
• transparency,
• responsiveness,
• consensus orientation,
• equity and inclusiveness,
• effectiveness and efficiency and
• accountability.
• [Protection of Human Rights].

These characteristics assure that

• corruption is minimized,
• the views of minorities are taken into account and
• that the voices of the most vulnerable in society are heard in decision-making

Participation

• Participation by both men and women.
• Participation could be either direct or through legitimate intermediate institutions or representatives.
• Participation also means freedom of association and expression on the one hand and an organized civil society on the other hand.

Rule of law

• Good governance requires fair legal frameworks that are enforced impartially.
• Full protection of human rights, particularly those of minorities.
• It also means independent judiciary and an impartial and incorruptible police force.

Transparency

• Decisions taken and their enforcement are done in a manner that follows rules and regulations.
• Information is freely available and directly accessible to those who will be affected by such decisions and their enforcement.

Responsiveness

• Institutions and processes try to serve all stakeholders within a reasonable timeframe.

Consensus orientation

• Need of mediation of the different interests in society to reach a broad consensus in society on what is in the best interest of the whole community and how this can be achieved.
• It also requires a long-term perspective for sustainable human development and how to achieve the goals of such development.

Equity and inclusiveness

• Ensuring that all members of society feel that they have a stake in it and do not feel excluded from the mainstream.
• This requires all groups, and especially the most vulnerable to have opportunities to maintain or improve their well being.

Effectiveness and efficiency

• Processes and institutions produce results that meet the needs of society while making the best use of resources at their disposal.
• It also means sustainable use of natural resources and the protection of the environment.

Accountability

• Governmental institutions as well as the private sector and civil society organizations must be accountable to the public and to their institutional stakeholders.
• In general organizations and institutions are accountable to those who will be affected by decisions or actions.

A Basic Practical Example of Good Governance would be where a member of a committee, with a vested interest in a topic being discussed at committee, would absent themselves from the discussion and not attempt to exert influence. See also Ethics in Public Office and Due Diligence

• An Introduction to good governance by the United Nations Economic and Social Commission for Asia and the Pacific
• Applying Economics to Economists: Good Governance at the International Financial Institutions
• The World Bank has a set of cross-country Governance Indicators
• The OECD Development Centre analyses the Uses and Abuses of Governance Indicators
• Institutional reform survey instrument
• Special issue of World Development on good governance and decentralisation, Nov 2006.