It is however misleading to group Latin America as one.

The bottom line is that Iran’s Ahmadinejad is being welcomed in only four countries.  And the four welcoming countries exhibit very poor levels of governance, very much like Iran…

Take for instance one of the six dimensions we measure periodically in the Worldwide Governance Indicators (WGI), namely Voice & democratic Accountability (VA), which captures the extent to which political rights and civil liberties are provided, as well as freedom of association, of expression and of the press.

The above chart first shows how low Iran ranks worldwide in Voice & Accountability, with only about a dozen countries rating below Iran among over 200 around the world.  Furthermore, the chart also shows that governance in Iran has deteriorated markedly since 1998 (for each country, the left column depicts the country’s percentile in 1998,  while the right hand-side column depicts the percentile rank in the most recent period, 2010).

Then, following the low scores of Iran, the chart depicts the Voice & Accountability levels in 1998 and 2010 for the 4 Latin American countries that have welcomed Iran’s leader, namely Cuba, Ecuador, Nicaragua and Venezuela.   We see that the performance of these 4 countries tend to  mirror that of Iran in terms of democratic governance:  deteriorating over the past dozen years, and very low nowadays.  The WGI also shows that the performance of these 4 countries is also subpar on other dimensions of governance, such as Rule of Law (not shown in the chart, but data is here for over 200 countries for all 6 governance indicators).

As we keep moving towards the right in this chart, we traverse to a very different set of Latin American countries: those that are not welcoming Ahmadinejad.  Due to space limitations, we only show some prominent Latin American countries that are now welcoming Iran; in reality there are many more than those shown in the chart.

We clearly see that the many unwelcoming countries to Iran do exhibit much higher levels of democratic governance, and generally improving over the past dozen years (or at the very least not deteriorating).  A stark contrast between the welcoming and unwelcoming countries in Latin America is clear from the data.  There are a few bedfellows of Iran all governing similarly poorly (not surprisingly, since they are bankrolled by the leader of one country, Venezuela), on the one hand.  And then there are many prominent Latin American countries governing better, on the other.

Ahmadinejad was not warmly welcomed and embraced by Latin America, but by Venezuela’s Chavez and a few of his clients.  This, at least, is what emerges from the evidence-based perspective provided by the WGI.

Yet they have stirred up controversy. As is often the case with provisions that aim at changing the rules of the game, Sections 1502 and 1504 have pitted stakeholders that support their passage and full implementation against the interests of those that wish to water them down or greatly delay their implementation. Last Tuesday, Brookings and Global Witness hosted an event at the National Press Club to examine the debate surrounding these two provisions*…

Representative Jim McDermott kicked off the event by explaining that passing Sections 1502 and 1504 is only half the battle. The eventual effectiveness of these provisions largely depends on how the final rules are written and implemented. If well implemented, they could contribute to increased transparency, empower citizens to capture the gains from natural resource wealth and deny financing to dangerous armed groups in the Democratic Republic of Congo and the surrounding countries…

However, if opponents of these rules succeed in sufficiently watering them down, many of these gains will not be attained. With this in mind, panelists and participants from civil society, the private sector, financial sector and think tanks discussed the benefits, potential costs and implementation challenges of Sections 1502 and 1504.

The first part of the discussion, moderated by Simon Taylor from Global Witness, focused on the costs and benefits of Section 1504, which requires U.S. companies in extractive industries to report project-level payments made to foreign governments. Isabel Munilla from Publish What You Pay (PWYP) emphasized that with detailed information, citizens, civil society organizations and NGOs will be able to monitor corporate and government interactions, hold both groups accountable, and ensure that natural resource wealth contributes positively to local development and livelihoods. Daniel Kaufmann pointed out that data and research from around the world suggests that in the long run, with increased transparency and accountability, citizens could see up to a 300 percent development dividend from improved governance – i.e. their incomes per capita could triple.

Bennett Freeman from Calvert Investments suggested that transparent companies attract more investors because disclosure clarifies investment risks. And Laurel Green from Rio Tinto also supported implementation of these disclosure reforms, pointing out that such transparency can be a competitive advantage since firms can provide host governments with clear evidence of how they contribute to government revenues and communities. Yet not all companies may view such transparency reforms to their advantage. From an economic incentive standpoint, Kaufmann highlighted that, as with practically every rule, Section 1504 also means that there will be winners and losers. Companies that focus on efficiency and innovation stand to benefit, while those that derive gains from rent-seeking, monopolistic behavior or tax avoidance would have an interest in maintaining an opaque status quo.

Some large companies and industry associations that are opposed to the disclosure rule in Section 1504, such as Shell and the American Petroleum Institute, have suggested that project level disclosure will be very costly, position publicly traded firms at a competitive disadvantage, and possibly face in-country discrimination in places with lack of disclosure. There was discussion during the panel suggesting that these claims may be exaggerated.  The reality is that companies already have systems in place to track revenues and payments. In fact, even though Section 1504 is not under implementation yet, some large corporations— like Rio Tinto, Statoil and Newmont Mining, among others— already disclose payments in every country of operation. Further, as reported by some companies that are already disclosing, there does not appear to be compelling evidence that companies will face major penalties by non-transparent governments.

Some companies are also concerned that competitors could use disclosed information to their advantage. First, the information that should be disclosed does not appear to fall under the proprietary trade secrets category. Furthermore, since the rules cover all companies listed on the U.S. stock exchange, major companies like Shell, Exxon and BP are covered, as are some state-owned ones, like Petrobras and Petrochina. Last, and not least, disclosure requirements along the lines of Section 1504 are already being drafted in the European Union, and consideration of similar rules is also taking place in South Korea and Hong Kong, which would widen the network of companies covered and further level the playing field. If anything, firms listed in the U.S. can get a head start on those companies not yet covered by disclosure requirements.

Since it will be virtually impossible to roll back Section 1504 on transparency in natural resources as well as difficult for companies to oppose transparency from a public relations perspective, the strategy by companies opposed to disclosure has been to lobby for watering down the eventual rules issued by the Securities and Exchange Commission and to delay the effective implementation of the rules. The most important component in watering down such provisions would be to make disclosure a requirement merely at the aggregate country-level rather than at the project-level. This loss of this crucial detail would greatly reduce the impact of the measure. All the panelists during this session, including those from the private sector, argued in favor of detailed project-level disclosure.

In the second session, panelists and participants discussed Section 1502, which requires companies that source minerals from Congo-DRC and adjacent countries to disclose whether they use conflict minerals. The rule relies on the adverse reputational impact of such disclosure rather than mandating penalties for actually sourcing minerals from conflict-afflicted regions where militias may be benefitting from this trade. No reputable company wants their product associated with armed conflict, human rights violations, slavery and rape. Yet again there are some companies that support these reforms, while others oppose them.

Corinna Gilfillan from Global Witness, Delly Sesete from CREDDHO in the DRC, and several participants in the audience from the DRC region emphasized that although Section 1502 will not itself end conflict in Congo, it could hold companies accountable for sourcing from mines controlled by militias. The U.N. Group of Experts on Congo has already found that since the signing of the Dodd-Frank bill, there has been a reduction in the portion of mined minerals that is funding the conflict. By denying financing to the armed groups that perpetuate violence in the region, the provision can contribute to increased stability and improved human rights.

As with Section 1504, some companies are claiming that implementation costs associated with conflict minerals in Section 1502 will be very high. There are numerous estimates of these costs, ranging from the SEC’s estimate of $71.2 million to the National Association of Manufacturers’ (NAM) estimate of $9-$16 billion. Recent estimates produced independently by the Claigan Environmental consulting firm and presented by Bruce Calder during this panel suggest that costs to the industry are expected to be less than $815 million.

In fact, some proactive companies (both domestic and foreign) are already showing that tracking supply chains is both practically and financial feasible. Sandy Merber from General Electric and Tim Mohin from AMD discussed how pooling industry resources could help offset individual firm costs. The Electronics Industry Citizenship Coalition and the Global e-Sustainability Initiative have partnered with firms to develop the “Conflict Free Smelters Program“, which allows companies performing due diligence to trace their mineral supply chain down to the smelters who are certified as being either conflict free or not. Efforts are being made to now certify smelters in the DRC region under this program to help preserve access to the international markets for impoverished artisanal miners. Yet the companies that have already taken the lead in tracking the supply chain are a minority, and thus they are bearing a disproportionate share of the cost for so doing. Once the rules are issued and regulations implemented, this cost would be spread among a larger universe of firms.

There are concerns among some in the DRC that Section 1502 will have negative unintended consequences on citizens in the region. They suggest that the disclosure requirements are driving firms out of the DRC, citing falling mineral trade as evidence. Yet Section 1502, which has not yet even been implemented, cannot solely be blamed. Since April 2010, when the DRC-government-imposed six-month minerals embargo ended, trade in minerals has been on the rise. Sesete argued that much of the talk of unintended consequences was akin to fear mongering. He and others have pointed out that the mineral trade in that region is a relatively recent activity and citizens had (and continue to have) other sources to support their livelihoods. Further, he emphasized that the benefits of increased security and reduced violence and instability are too great to dismiss Section 1502 outright.

In the end, as pointed out by Mark Taylor from FAFO, the ability of Sections 1502 and 1504 to achieve their goals depends heavily on effective implementation. The final rules on these two provisions have yet to be released by the SEC. Therefore, the uncertainty surrounding the final rules has contributed to speculations on the cost (both to companies and countries) of implementation. The sooner these regulations come out and the clearer the standards they set are, the greater chance these provisions will have in maximizing the benefits to global transparency, accountability and governance.

As Senator Ben Cardin reminded the audience during his closing presentation, the importance of Sections 1502 and 1504 transcends U.S. companies and Central Africa. Indeed, while the SEC should carefully weigh potential benefits and costs in the implementation of Section 1502 and 1504, the balance should be in favor of transparency.

And the importance of leadership should not be ignored: these specific disclosures in Dodd-Frank will signal that the U.S. is taking the lead globally on these important aspects, potentially nudging other key financial centers to do likewise and thus benefiting governance, security and human rights in many corners of the world.

* On December 13, Brookings and Global Witness hosted The Transparency, Conflict Minerals and Natural Resources: What You Don’t Know About Dodd-Frank, an event examining Sections 1502 and 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.  The agenda and full transcript can be found here.  This article was co-authored with Veronika Penciakova and originally published in the Brookings website.

Yet, what is not so well known is how the Dodd-Frank Act extends beyond Wall Street and even the rest of the United States. There are two provisions in it that are intended to promote transparency and governance in natural resources in countries outside the United States…

Section 1504 is the more general provision on transparency. It mandates oil, gas and mining companies registered with the Securities and Exchange Commission (SEC) to publicly disclose the tax and revenue payments made to any government.

The more specific Section 1502 requires that companies that use minerals from the Democratic Republic of Congo (DRC) and adjoining countries disclose whether such minerals are sourced from areas in conflict within that region, so to provide information as to whether the payments made by such companies may be funding armed groups in those areas…

While few would publicly argue against promoting transparency generally, it is no secret that these provisions have generated much discussion and controversy. This matters for how the provisions will be implemented in practice. Thus, it is important to seriously debate all sides of the issues surrounding these two provisions, including the criticisms leveled against them.

For instance, it is important to discuss whether Section 1504 — which mandates transparency requirements in oil, gas and mining-related payments to governments — does not impose new and enormous (multi-billion) costs of compliance, which may create a major competitive disadvantage on companies.

Further, do project payment disclosures really mean revealing trade secrets? If there are costs, how do they stack up against the benefits from transparency and disclosure in natural resources? And on the other hand, what are the benefits to transparency? How can greater transparency help improve the management of natural resources in a way that contributes to economic development and increase accountability?

As indicated, Section 1502 is aimed at cutting off financing to armed groups who have profited from trade in minerals and use this money to finance their operations. The issues of compliance costs and competitive disadvantage are also concerns for some parties with regard to this section on conflict minerals.

There are also additional questions that merit debate, such as assessing the potential benefits from denying armed groups from being financed by companies purchasing minerals and the reduction in violence and human rights abuses, versus the potential for disruption in trade on minerals from the DRC and adjoining countries. This may inflict undue “collateral damage” on some mineral-extracting areas that are not conflict-ridden.

On the other hand, these costs should be weighed against the costs of continued trade in conflict minerals. How high are these costs? And what are some benefits for companies and the DRC in developing a clean minerals trade?

These and many other relevant and related issues will be debated in a public event this coming Tuesday, December 13, at the National Press Club in Washington, D.C.   We at Brookings along with Global Witness will host a discussion to examine these two provisions in the Dodd-Frank Act.

Leading experts from civil society in the United States and Africa, the private sector, the financial sector and think tanks will participate in an interactive panel setting to review the priority issues surrounding each provision.

Representative Jim McDermott (D-Wash.), will provide the opening remarks while Senator Ben Cardin (D-Md.) will give the closing remarks. And Reverend Jim Wallis of Sojourners will also be speaking during the lunch break. The panels will provide ample room for debate among the panelists and between the panelists and the audience, aiming at bringing out the key issues from all sides.

Given the importance of these initiatives and the ongoing discussions on their implementation details, we expect a lively debate.

Earlier this summer, President Obama welcomed one day apart Gabonese President Ali Bongo and Nigerian President Goodluck Jonathan to the White House.  Both countries share in common significant oil wealth, weak public institutions, and a large proportion of the population living in poverty.

Nigeria is ahead of the laggard Gabon in terms of developing democratic institutions, and has made inroads compared with its misgoverned authoritarian regims in past decades, even though it still faces considerable governance challenges, such as corruption (including in some provinces) and violence…

Then, shortly after President Obama welcomed these two African leaders to to the White House, First Lady Michelle Obama embarked on her second official solo trip, this time to South Africa.

While oil geopolitics played a role in the U.S. president’s agenda, the heightened emphasis on sub-Saharan Africa, and especially on its economic progress, is in stark contrast to how the region was cast in the past. For decades Sub-Saharan Africa (SSA) was inappropriately cast by many in the West as a wholesale “basket case”; an abjectly poor, economically stagnant region.

We rejected such an “afro-pessimist” view in the past.  Yet over the past year or so the pendulum may have swung to the other extreme. The region’s overall performance in recent years – featuring economic growth and reductions in poverty and child mortality rates, among other achievements – had many heralding Africa’s “new dawn”. 

And now, in light of the ongoing famine in Somalia, a failed state, the conflict in Sudan and Chad, and the brazen act of terror that just took place against the UN headquarters in Abuja, the Nigerian capital, the holdover afro-pessimists may attempt a resurgence of their view of doom for the continent.

Now we take exception to both extremes.  Our analysis* suggests that progress in a number of African countries has been laudable, yet one should be wary of premature exuberance and shy away of overly rosy assessments and  declarations that some official aid organizations tend to disseminate nowadays, abstaining from touching on critical pending challenges in governance and corruption.

The high variance in governance and development performance across the SSA warrants focusing on country specifics, moving past regional averages and mere comparisons with a troubled  past.  Indeed, contrasting the performance of African countries with that of other emerging economies provides added insight into the challenges facing the continent.

Africa is a Diverse Continent

Too often sub-Saharan Africa has been viewed as a singular unit rather than a conglomeration of 48 individual countries. While income per capita in the region grew at an average rate of 2.1 percent annually over the last decade, per capita growth rates ranged from -6.0 percent in Zimbabwe and -4.1 percent in Eritrea to 15.3 percent in oil-rich Equatorial Guinea, 7.7 percent in oil-rich Angola and 6.2 percent in Sierra Leone. A high variation across countries in Africa is also evident on a variety of other economic and governance indicators.

Radelet (2010) explores cross-country differences by distinguishing between groups of countries based on economic performance, classifying SSA into four groups – emerging (17 countries, such as Ghana and Ethiopia), threshold (six countries, such as Liberia and Benin), oil exporting (nine countries, such as Angola and Congo) and other, which we re-label as fragile (16 countries, such as Somalia and Zimbabwe) [1].

According to Radelet, countries in the emerging category have experienced economic growth and poverty reduction since the mid-1990s, while threshold countries have seen similar, though less dramatic, economic changes. Oil exporters have experienced uneven and volatile progress, and fragile countries have seen few economic improvements.

On average, incomes per capita among Radelet’s group of 17 emerging SSA economies grew at 3.2 percent annually over the last decade. Growth in emerging economies outpaced threshold (1.7 percent growth) and fragile (-0.5 percent growth) countries, though not oil producing ones (4.5 percent). However, it is important to note that even among this elite group of emerging countries there is a high variance in both economic and governance performance [2].

Since research has shown that the quality of governance impacts long-term growth and development, it is particularly important to emphasize governance alongside short-term economic performance. We have reviewed the performance of SSA countries on a broad range of governance indicators, including voice and accountability, political stability, government effectiveness, regulatory quality, rule of law and control of corruption from the Worldwide Governance Indicators, and political rights, civil liberties and press freedom from Freedom House.

We find that the 17 emerging economies category can be split into at least two groups – those that we label as performing emergers, which have had adequate growth rates and relatively satisfactory levels of governance, and the quasi-performing emergers (Ethiopia, Rwanda, Uganda and Zambia), which have exhibited adequate per capita income growth in recent years but where governance performance remains subpar.

The quality of governance across countries in the region differs considerably, and even among the “emerging” group of countries in SSA we observe substantial variation in voice and democratic accountability (Figure 1 below). On average the group we label performing emergers rates in the top half of all developing countries; by contrast, the group of quasi-performing emergers rates in the bottom half of all developing countries on this important governance dimension.

To illustrate, among the 17 emerging SSA economies some stellar countries like Mauritius and South Africa (performing emergers) exhibit voice and democratic accountability on par with Slovakia and Brazil, while countries like Rwanda and Ethiopia (quasi-performing emergers) are on par with Afghanistan and Azerbaijan. Further, according to Freedom House, while the 13 performing countries among the emergers have either a free (39 percent) or at least a partly free press (61 percent), with the exception of Uganda (partly free), the press in “quasi-performing” countries is rated as un-free.

While it may be tempting to generalize and hail sub-Saharan Africa’s “new dawn” (or as “old doom revisited” by some naysayers), it may be more accurate to hail it as:  a dawn of a select few performing emergers with strong growth and good governance. This group represents only a quarter of the region’s countries and a fifth of its population.

Cross-Regional Benchmarking Provides Insights

We have noted that several SSA countries have seen improvements in social and economic indicators over the past decade. But benchmarking against other developing countries and regions provides additional perspective.

Some sub-Saharan African countries exhibit strong economic performance relative to countries in other regions, though several do not. Over the last five years, average per capita incomes in SSA grew slower than in any other developing region (2.3 percent growth).

On the one hand, the growth performance of SSA’s performing emergers (3 percent growth) was on par with the regional average for all countries in Latin America (2.9 percent growth) and with the new European Union countries (3.2 percent growth). On the other hand, countries in SSA’s “threshold” (2.2 percent growth) and “fragile” (0.2 percent growth) groups performed well below these groups and on par with countries that were either generally misgoverned or harder hit by the recent global financial crisis.

A similar pattern emerges when comparing governance across world regions. As Figure 2 suggests, the extent of control of corruption among performing SSA economies is similar to that of countries in Latin America and the Caribbean (LAC), but below the levels of East Asian newly industrialized countries and newly acceded EU countries. Quasi-performing emerging economies of SSA display governance levels similar to those of developing East Asian countries, and threshold and fragile countries have governance levels on par with South Asia and Former Soviet Union economies. Notably, SSA oil producers have the weakest control of corruption among any of these groups (Figure 2).

Our assessment of economic and governance progress in SSA countries points to both encouraging and sobering news. About a quarter of the region’s economies are performing well relative to their neighbors as well as their competitors worldwide in areas such as growth and governance. Yet the majority of sub-Saharan African countries are still lagging behind, in growth, voice and democratic accountability, control of corruption and other important dimensions of governance (including political stability, rule of law and government effectiveness).

A key question is how to foster continued progress in performing countries and promote growth-and development-enhancing change in non-performing ones. Rather than providing a long list of recommendations—which would be futile given diversity of the countries— we put forth some principles to spur a discussion on priorities for reform.

Focus on Targeted Proposals

The challenges facing many African countries are complex, ranging from low productivity to high unemployment and from an underdeveloped middle class to poor health outcomes. It is often tempting to draw up a long list of reforms trying to tackle each one. But, not every sectoral constraint is best addressed through an isolated intervention, and resources, political capital, and institutional capacity are limited. Each country also has its own first-order priorities. Therefore, a country should focus on key reforms that are mostly likely to have the largest impact at every stage. While recognizing the importance of other areas, we focus on governance, which affects all economic sectors and is central to achieving sustainable development.

Fundamental and proximate causes of underdevelopment differ. The numerous causes of underdevelopment in SSA can be divided into two categories: proximate and fundamental. For instance, many countries in the region lack a strong middleclass, which may hinder domestic savings and investment. While it is impossible to “inject” a middle class into Africa, it is possible to foster its development by tackling the underlying constraints that hinder its growth.

A fundamental cause of underdevelopment is poor governance. Research shows that good governance fosters sustained growth in the longer term through domestic and foreign investment, private sector development, improved public sector management and sectoral development. Additionally, voice and accountability, political stability, corruption control and rule of law are crucial for equitable growth and middle class development. The latter are often identified as key constraints to progress in sub-Saharan Africa.  But in fact they represent proximate causes.

Governance has a large development dividend. Through various channels improvements in governance may spur progress in areas that are currently hindering development in sub-Saharan Africa and other regions.

•  Improved governance facilitates incomes growth.  Previous research suggests that there is a large development dividend to improved governance. In the long run, on average incomes could rise three-fold if the very weak control of corruption in Zimbabwe was improved to those of Senegal, or then from those of Senegal to the middling levels of countries like Botswana.

In this Motion Chart (Figure 3, linked here, and play button will activate motion over time) the positive relationship between control of corruption and income per capita over time can be seen. Improvements in other aspects of governance, including political stability and rule of law have similar effects on incomes, and causality has been found to run from improved governance to higher incomes (rather than the other way around).

• Voice and democratic accountability promote equitable and sustained growth. Recent events in and around the region have highlighted the importance of voice and accountability. Countries in North Africa that experienced high growth in recent years, such as Tunisia and Egypt, have recently experienced social unrest and undergone regime change.

Instability in the Arab region has stemmed from popular dissatisfaction with the governance deficit, highly inequitable growth, unproductive or non-existent job prospects and corrupt institutions. While the realities and challenges of SSA differ some from those of the Arab world (and North Africa), many countries in SSA still face a large democratic governance deficit and corrupt institutions, even within the emerging group (Figure 1 above). The risk of unrest is real in a number of SSA countries.

Such social unrest and prolonged civil wars also undermine economic and social development. Research has shown that conflicts reduce growth rates, even during post-war recovery, and have a severe negative impact on human health. In fact, nearly half of Radelet’s fragile economies can be considered conflict or post-conflict countries.

•  Good governance promotes competitiveness and investments. Numerous studies have found a positive relationship between private investment and high regulatory quality and control of corruption. Weak regulations and high corruption create uncertainties in the economy and may discourage investment and result in ineffective allocation of resources and a diversion of funds. Other components of good governance are also strongly connected to private sector growth. As Figure 4 indicates, countries with stronger rule of law are more competitive.

By July 2009, Congressional approval ratings declined to just 32 percent. Just prior to the debt-ceiling debate three weeks ago, they stood at 18 percent. These poll figures contradict Gallup’s expectation that there would be a surge in Congress’ popularity following the 2010 midterm elections. It had been suggested that Congress’ ratings may rise since that had been observed following some prior midterm elections.  But not quite…

It may come as no surprise if the next Gallup poll, expected to come out in mid-August, shows Congress’ approval ratings hitting an all time low. Another poll, conducted by Rasmussen more recently, reported a few days ago that only 6 percent of U.S. voters rated Congress’ performance as good or excellent, a new low in their poll. Their previous monthly low was last month— only 8 percent of U.S. voters rated Congress as good or excellent.

These polls speak to the dim view that voters have of how well Congress has been doing its job in general— not just related to the debt ceiling paralysis. Since this picture, based on the views of citizens and voters is not unknown to many in Washington, there is no need to belabor it further.

What is less recognized in the U.S. is the extent to which the private sector holds a dim view of Congress, and how this contrasts with how the private sector views the effectiveness of parliaments in other countries.

From our large worldwide governance databank that include dozens of sources, we can draw from one particular source first, namely a large survey of enterprises around the world. The World Economic Forum conducts annual surveys of over 10,000 private sector executives in over 130 countries. A simple analysis of the reports of those enterprises suggests how abysmally low the U.S. private sector their Congress (first column, Figure 1).

   If one compares the ratings for the U.S. Congress (lowest by far of any institution in the U.S.) with that of other institutions, we find that U.S. respondents do not have a dim view of the whole public sector or of simply any public institution. In Figure 1, we see the large gap in how the private sector views Congress as compared with either the police or the judiciary.

We also see in Figure 1 how differently the private sector in other countries views their own parliaments.  In 2010, executives in India, Germany, the UK, Canada and Sweden, among dozens of other countries, reported that their Parliaments function much more effectively than U.S. executives.  It is also noteworthy that these ratings do not differ substantially across OECD countries, including the U.S., for institutions other than their parliaments.  It is not a generalized dim view of the U.S. private sector regarding public sector performance.  It is about their Congress.

    Moreover, in countries like Germany, Canada and Sweden, there has been a positive trend in private sector confidence in their legislative body, which contrasts with the U.S.’s downward trend (Figure 2). If we only look at the U.S., we see that today’s dismal ratings of Congress’ performance need not be the case given data from previous years. In fact, the private sector’s assessment of Congress’s effectiveness was much higher in 2002, but has steadily declined. By the time the 2011 data is available, it is highly likely that the downward trend regarding the views on the U.S. Congress will continue.

In fact, more broadly, our Worldwide Governance Indicators (WGI) point to the fact that for some time the U.S. has been far from a model country in governance. At the start of the past decade, there were 15 countries around the world with better governance on average than the U.S. By the end of the decade, there were over 25 countries with better governance than the U.S. Such subpar performance in general on governance performance can be attributed in part to the performance of Congress.

A dysfunctional U.S. Congress may be the talk of the town and the world today. But empirical evidence suggests that it need not be the case. Other U.S. public institutions are performing much better in the eyes of the public and the private sector. Parliaments in other countries are doing well and improving over time, which shows that legislatures can be effective. The U.S. Congress itself has seen much better days. The American people and the world are hoping that Congress can rise to the task at hand given the urgent need to raise the debt ceiling in order to avoid the threat of another global economic and financial crisis.

And the forum’s co-chair, Brazilian Minister of Foreign Affairs Antonio Patriota, also stressed that through such multilateral cooperation the OGP could play a role in stimulating innovation, improving the quality of public services and contributing to national efforts in governmental transparency.  Throughout the forum, governmental and non-governmental representatives from around the world emphasized the important role that civil society organizations can play in encouraging openness, empowering citizens and promoting change through their own transparency initiatives.

The OGP Forum was an auspicious start to an ambitious project. However, achieving global transparency remains long and challenging, and only over time will the concrete contribution of this initiative be seen.   Yet, this inaugural forum showcased exciting initiatives and raised important questions, such as how to effectively build networks of governments, foster cooperation with civil society organizations, identify targeted reforms and use technology to foster a transparent environment.

Many governments have already made great strides in promoting transparency: For example, Brazil is now disseminating information on government spending and fund transfers data through their Transparency Portal;  the U.S. has embarked on efforts to publicly account for Recovery Act spending; and Kenya has published its national census, government expenditure and parliamentary proceedings data through its new Open Data Portal.

Civil society actors around the world are working to further the transparency agenda in diverse ways.  India’s NGO MKSS combats graft stemming from the implementation of the National Rural Employment Guarantee Act by painting employment and building material costs on walls outside of construction projects in rural areas.  Ushaidi Kenya maps citizen reports of acts of violence, while Chile’s innovative Ciudadano Inteligente promotes transparency and active citizen participation through new web technologies.

The OGP offers an opportunity for governments from around the world to share best practices in transparency reforms and the inclusion of both governmental and non-governmental participants facilitates collaboration between key stakeholders. Civil society organizations could continue to nudge governments toward increased transparency, as well as complement and reinforce ongoing reforms by disseminating information to the public and monitoring implementation. For instance, in Slovakia, the Fair-Play Alliance’s Z Nasich Dani (From Our Taxes) new online tool, which discloses the names the individuals behind companies who do business with the government, is complementary to the Slovak government’s online publication of public service contracts by allowing citizens to dig deeper into the relationship between companies and the state.

The OGP is also working to identify the transparency reforms to promote. The OGP used four criteria (fiscal transparency, access to information, senior official disclosure and citizen engagement) to identify around 80 eligible countries, but it is no secret that each country finds itself at a different level of openness.  Although it is noteworthy that the criteria extended beyond the existence of e-government to encompass deeper forms of transparency, the OGP will still need to strike a balance between emphasizing country-led solutions while encouraging deeper reforms and discouraging “open government” rhetorical window-dressing.

It is reasonable to expect very different paths; some countries may initially focus reforms in “high-risk” sectors, such as in the extractive sector in resource-rich countries, while others may focus first on engaging the citizenry in the policymaking process.  Either way, it is important to attain broad consensus regarding what constitutes concrete progress, versus mere pronouncements or decrees on paper only.

The important role of transparency reforms in combating corruption was the subject of a specialized panel at the OGP forum. For transparency to have more substantial impact on anti-corruption and development, deeper reforms may be needed. For instance, publishing official statistics and general budget data online can be a first step, but one ought not declare “premature victory” after tackling such generic “low hanging fruits.”

Indeed, well implemented freedom of information laws or well disseminated budgetary and procurement details at the project and municipal level can be expected to have larger effects.  Furthermore, there can be large payoffs to tackling the more politically difficult reforms, such as transparency in the drafting of laws and in policymaking, campaign finance, lobbying, the disclosure of officials’ assets, and fully disclosing which powerful private sector and media executives the leaders of government meet regularly with.

New technologies are only part of the answer. Twenty-first century technology has simplified and accelerated information dissemination and has lead to a new set of cost-effective and interactive tools that make it easier for the public to engage with the data. Many existing open data platforms can easily be adapted to visualize different datasets at a relatively low cost. For instance, the United States and Kenya now use the same platform to publish their government data. However, as the open government agenda evolves, there is the risk of becoming hypnotized by technological wizardry at the expense of the availability, timeliness and accuracy of the most relevant types of information.

In this context, civil society groups, think tanks and researchers may play a role in reviewing the quality of information and data being disclosed (or withheld), in monitoring and analyzing information citizens deem the most relevant, and in constructing and disseminating user-friendly worldwide transparency and governance databases.   Yet we also need to be mindful that country context matters. Online tools may be helpful in many situations, but in others putting information on a wall or disseminating it through community radio or a mobile text message may be a more effective in reaching people.

   Research and experience suggest that there are links between transparency, combating corruption and more robust democratic institutions. The OGP represents an opportunity to further the openness agenda by bringing governmental and non-governmental partners together to share experiences that could inform and complement the implementation of transparency reforms at home.  Last week’s OGP kick-off forum was a positive step toward global transparency.

But it was a first step.  Significant work lies ahead in the months to come.  The first order of business is to get the OGP formally and concretely off the ground.  Led by their founding country members (Brazil, Indonesia, Mexico, Norway, Philippines, South Africa, the United Kingdom and the United States – and hopefully India decides to rejoin), the OGP is expected to be formally launched by country leaders during the upcoming United Nations meetings in late September in New York.  In parallel, the critical role of civil society needs to be concretely detailed, and governments from eligible countries have to formally join the OGP and be prepared to make transparency reform commitments that can be mutually reinforced and monitored.

[This post was jointly authored with Veronika Penciakova and originally published as a Brookings Commentary]

Unfortunately, bureaucratic or administrative corruption is far from being the most damaging type of corruption for a country, or internationally.  High level political corruption, and within it, the particular form we have called ‘State Capture’, can be far more damaging where it is prevalent.  We have been emphasizing the problem of state capture (the undue influence of the corporate elite in shaping the rules of the game) for well over a dozen years, including in countries like Russia and Ukraine (here), and also in the financial sector of the US (here), leading up to the recent Wall Street-induced global financial crisis…

But the challenge of state capture is tougher to quantify (though feasible).  More importantly, similar powerful vested interests that are at play in capturing the institutions (regulations, policies, laws) of the state also tend to discourage an open and frank debate on it.  This is particularly the case in official circles, among domestic and international elites.   In light of the Wall Street debacle, and the detailed insider accounts of what transpired before, during and after the crisis, it has been more difficult to mask the challenge of regulatory and state capture.

There is still a particular dimension of state capture which still goes relatively unrecognized as such, however.  This is the capture of one state’s foreign policies vis-a-vis autocratic countries through the undue influence by multinationals and lobbyists doing the bidding to favor a lenient treatment of the autocratic regimes.  In short, state capture in the international arena, or international state capture.

The current Libya crisis is exposing this type of capture.  It is becoming increasingly evident that for many years a number of US-based powerful multinational oil companies have been very pro-active in trying to influence US foreign policy towards Qaddafi.  Highly paid US consultants and lobbyists, including academics and former ambassadors have been recruited to burnish the image of Qaddafi in US official circles, to lobby favoring pro-Libya policies, to emphasize the commercial interests in that country, and to laud the ‘stability’ of Libya.

Obviously, concern for the totalitarian nature of the regime and the human rights abuses did not feature prominently in their work (to put it mildly).  Further, the now well known ‘revolving door’ in the US between the lobbying firms, the regulators, and the regulated within an industry seems to have also been extended to the US-Libya case.  For instance, according to a media report, the founding chairman of the lobbying group called US-Libya Business Association (USLBA) went on to a position of influence (regarding energy issues) in the US State Department.

All this, and much more, including the role of other lobbying and consultant firms, and the list of oil companies behind this effort, is described in detail in a recent report in The Huffington Post (here), and another one in Mother Jones (here). The first article also contains the now off site web-based brochure by the USLBA lobbyists, as well as excerpts from a diplomatic cable from the US embassy officials in Tripoli, released by WikiLeaks.  And the second article focuses on another lobbying association, called USA*Engage, with members such as Halliburton and oil giants, and their article suggests that they have currently been lobbying currently against the US imposing sanctions on Libya.

The Qaddafi debacle is still being painfully played out, and this evolving process is likely to expose further information and dire lessons.  And the details given by the reporting in the Huffington Post and in Mother Jones warrant outside scrutiny, given the sensitive nature of the allegations on the role of multinationals, lobbyists, and officials.  Nonetheless, at a broader level, it may not be premature to suggest that Qaddafi’s Libya may become a case study in international state capture, where effective lobbying and commercial interests (alongside the fight against terror) unduly influenced US foreign policy in a direction that paid little attention to the nefarious aspects of an autocratic leader who engaged in gross human rights violations and denied socio-economic development of its people.

It is particularly important to expose and openly debate these issues at this juncture, not only given Qaddafi’s debacle, but also in the context of the increasingly permissive ‘money-in-politics’ corporate environment in the U.S. in the aftermath of the troubling recent landmark Supreme Court decision on Citizen United vs. the Federal Electoral Commission which is likely to enable large corporations to become even more influential in policy.

Qaddafi’s Libya may also become a case study of the fallacy that Diplomacy and Development go hand in hand.  In reality, often they have opposed each other, with Diplomacy’ winning the upper hand.  Of course the challenge of international state capture is not unique to the United States.  For instance, as hinted in my previous post on the case of Qaddafi’s Libya, the case of the UK is rather similar.

Touching on the ‘Faustian Bargain’ where global commercial oil interests tend to dwarf human rights and development concerns, in this video interview I discussed briefly these issues a few days ago, here.

Six years ago, the consultancy Controls Risk Group, labeled Qaddafi as a “charismatic dictator” and stated that “politically, Libya is a stable country. There is currently no viable challenge to Gadhafi’s leadership. The security risk to business in Libya is very low…by far the greatest risk to foreign companies operating in Libya is its business environment.”At the same time, CNN, citing another global risk assessment report, wrote that “while the terrorist threat in Iraq has increased, Libya is among the safest places to do business…Gadhafi’s North African state…ranks with Scandinavia and much of Eastern Europe as being relatively safe from terrorism, organized crime and political violence.”

A year ago, BBC reported that “Libya [was seeing] ‘limited improvements in human rights.”  A mere four months ago the Export Development for Canada (EDC) agency stated that “external threats to Libyan regime stability are negligible and the Libyan security services have been generally effective at containing the threats posed by Islamic extremist groups.”

And only a month ago, The Economist Intelligence Unit wrote about the absence of immediate domestic threats to Qaddafi’s rule, stating that “he has been in power for over 40 years and will continue to be careful to balance the competing power structures within the political hierarchy…There is at present little immediate threat to the ruling elite. Political power will remain vested in the Libyan leader…”

Much will be said about the diplomatic “Faustian bargain” struck by Western powers with Libya; about how the West turned a blind eye to domestic repression and human rights abuses in order to secure access to oil and to co-opt Qaddafi away from terrorism. The events in Libya and throughout the region demonstrate that there is a need for an honest review of the increasingly discredited notion that “Diplomacy and Development” seamlessly go hand in hand in foreign assistance.

Yet, similar attention will need to be paid to revamping how political risk is assessed. It is not just until recently that political risk in Libya was considered low. While Western officials turned a “political blind eye” to the abuses and excesses of Libya’s leader and his sons and cronies, most analysts simply turned the spotlight away from the country (and those still looking at Libya got it wrong).

This problem is suggested in Figure 1, which shows the results of a Google Ngram search on the share of the selected words which appear in books and scholarly writings every year. Libya’s leader, Qaddafi was definitely in the analyst spotlight during the terror-related period of the mid-to-late ’80s, but since then interest in the leader waned. For instance, in recent times, Zimbabwe’s woeful head of state, Mugabe, has garnered over twice as much interest as Qaddafi. While Mugabe is another example of disastrous and callous leadership, it would be difficult to make the case that he is twice as powerful, dangerous or (human-rights) abusive as Qaddafi.

Clearly, in addition to governments and investors, many analysts also dropped the ball on Libya. In this context, it is also noteworthy how little attention was paid by officials, the media and pundits to Qaddafi’s mental health; at most there were mere mentions that he was “eccentric.” Implicit in the traditional Faustian bargain between the West and despots like Qaddafi has been the belief that while human right abuses are regrettable, they do not fundamentally affect or alter the West’s “geo-oil” diplomatic objectives, nor are they necessarily very detrimental to economic development.

In light of recent events in the Mideast, potently illustrated by Egypt and Libya, this notion ought to be challenged, since both political stability and development are being undermined precisely in countries with large democratic and human rights deficits. The countries’ citizens have understood this clearly for some time, and many see the West as being complicit. Of course, the West is not alone in sharing the blame; in May 2010, Libya was elected by 155 U.N. member governments to the U.N.’s Human Rights Council. Two months later Libya asked the U.N. to close its Human Rights Council office in Libya.

Consequently, even from a self-interested foreign policy perspective, the West will need to pay closer attention to democratic and human rights deficits in countries where they persist. It is telling to trace with data Libya’s democratic and human rights deficit and corruption control over the past dozen years, during the period it enjoyed “kid-glove treatment” from Western powers.

Libya’s abysmal performance on voice and democratic accountability is depicted in Figure 2, with the country rating among the bottom 10 countries in the world by 2009, after having experienced deterioration in its already poor performance. A similar deterioration occurred in the country’s control of corruption. Libya’s poor performance contrasts the experience of many other countries, like Ghana, whose performance has improved over the period and who nowadays ranks in the top half of the world on both dimensions.

The ICT-driven social network revolution, the importance of activist global TV networks like CNN and Al Jazeera, and the rise of bottom-up collective action have significantly increased the effectiveness and reduced the costs of “people’s insurrections” against illegitimate regimes which exhibit a major deficit in democratic governance and corruption control.

Moving forward, political risk analysis and foreign aid agencies will need to pay closer attention to the importance of democratic governance factors, including civil liberties, human rights and corruption, in affecting political stability in a country—even where the repressive authoritarian machine is seen a priori as capable of brutal crackdowns against its people.

Since this incident, Tunisia’s government has fallen and demonstrations have spread to Yemen, Jordan, Algeria, Sudan and Egypt, where only yesterday well over a million people took to the streets to demand the ousting of President Mubarak, whose days appear numbered.

And Yemen’s president has also announced that he will not seek re-election or hand power to his son, while the prime minister and government of Jordan was dismissed by the King after demonstrations.  The world has been watching and Middle East experts, politicians and pundits have weighed in on the unfolding events. Many wonder whether we could have foreseen this wave of unrest…

On the contrary, until a few days ago many pundits were still predicting that instability – let alone regime change – would not spread to Egypt. Some highlighted the apathy, cynicism, fatalism and fear of Egyptian citizens in predicting the persistence of the longstanding status quo in Egypt. “No Sign Egypt will take the Tunisian Road” was the title of a BBC article from Cairo just two weeks ago. It noted that “no one could describe Egyptian society as ‘aspirational’… Egyptians do not see any way that they can change their country or their lives through political action, be it voting, activism, or going out on the streets to demonstrate.”

Other major media outlets predicted that the status quo would continue in Egypt, citing limited freedoms as a distinguishing feature of Egypt. A recent Foreign Policy article suggested that Egyptian President Mubarak differed from the exiting Tunisian ruler because Mubarak cleverly combined limited freedoms with co-option and some opportunities for Egyptians to express their political grievances. The Economist argued that Egypt’s “relatively free press not only gives healthy air to protest, but acts as the sort of early-warning system that [Tunisia’s] Ben Ali, due to his own repressive tactics, sorely lacked.”

Time magazine predicted that no “Domino Effect” would result from Tunisia’s revolution, and that the U.S. would proactively prevent Egypt from following Tunisia’s path, while the Economist and BBC contrasted the weakness of Tunisia’s security forces with the superior training and equipment (largely provided by the U.S.) of Egypt’s. And a few days ago another expert explained in Foreign Policy why, in contrast with Tunisia, the army in Egypt would not side with the public, only to have the military announce days later that they respected the people’s legitimate demands.

To be fair, it is easy to criticize after the fact. However, most pundits focused on the differences between Middle Eastern countries to underscore the low probability of Tunisia’s revolution spreading throughout the Arab world. Consequently, not enough attention was paid to the fact that important similarities – notably perennial rulers, absence of freedoms, corruption, and a disenfranchised youth, all of which fueled people’s discontent – would far outweigh some perceived differences across countries.

Democratic Accountability

The Worldwide Governance Indicators (WGI), which has been compiled since the mid-1990s, measure six components of governance. One very important component is Voice and Democratic Accountability (V&A).[1] The V&A indicator measures not only whether countries hold elections, but also whether these are truly contested, legitimate, free and fair, whether the government is accountable to its citizens, and whether there are basic freedoms of expression and association, including protection of media freedoms, of civil society, and against human rights abuses.

The sobering reality is that in terms of Voice and Democratic Accountability, the Middle East has rated very poorly relative to the rest of the world for many years. With very few exceptions, there is little variation on this indicator across the region. Worse, even though the region began the past decade underperforming on V&A, most every country in the region has deteriorated since and ended the decade at even lower levels of V&A.

Figure 1 below shows the extent to which the Middle East has been afflicted by a severe deficit in accountability. In fact, all Middle East countries, with the exception of Israel, rank in the bottom half of the world on V&A. Within the Arab world, Lebanon and Kuwait are above the rest, but still remain in the bottom third globally. The remaining Middle East countries perform even worse, in the bottom quartile (25^th percentile or below) in the V&A component, including Tunisia and Egypt (both underperformed rather similarly). Countries like Iran, (North) Sudan, Syria, Saudi Arabia and Libya rank among the very bottom (10^th percentile or below).

From a broader global perspective, Egypt’s percentile rank, at a lowly 15.6 (out of a maximum of 100) in 2009 (meaning that over 170 countries around the world rated above Egypt) compares extremely poorly with countries like South Africa (67th percentile), Brazil (62), Ghana (61) and Indonesia (49). By the end of the decade, Egypt rated similarly in V&A to countries like Cote d’Ivoire, Angola and Congo.

.

Figure 1 also illustrates the deteriorating pattern in V&A over the past decade for many Middle Eastern countries in contrast to other regions. It is noteworthy again that there was a sharp deterioration in V&A in Tunisia, while Egypt experienced a similar, though not as large, decline during this period. The data are admittedly of an aggregate nature and provide a broad benchmark for the performance of the Middle East.

However, in light of the recent emphasis on the very particular differences across countries in the Middle East region, it is noteworthy that the data point to an important similarity across the Arab world — namely that basic freedoms have been absent and deteriorating.

In fact, all the bottom eight Middle East countries in 2009 experienced a deterioration in V&A from 2000 with the exception of Iraq, which started from the very bottom. It would be naïve to suggest that all these countries are now equally vulnerable to major unrest or regime change or to insinuate that those countries rating immediately above this list (whose performance is also subpar) are not vulnerable.  There are multiple, complex and unpredictable determinants of unrest and regime change. But, starting with a hard-nosed look at the democratic deficit does help.

Youth Disenfranchisement and Their Resourcefulness

The disenfranchisement that has plagued the Middle East youth is also quite evident in the data. On average, young people account for about 30 percent of the Middle East population, compared with less than 20 percent in the developed world. In addition, youth in the Middle East tend to be economically and politically disenfranchised.

Even prior to the recent recession, youth unemployment rates in the Middle East and North Africa stood at an estimated 25 percent or twice the unemployment rate of the rest of the world. For some countries, including Egypt, the youth unemployment rate approached 30 percent or about six times its adult unemployment rate. Most of the youth live on less than $ 2 a day.

The socio-economic frustrations of the youth in the Middle East are only compounded by their inability to freely express themselves and demand change through democratic channels. They are witness to unfree and tainted elections, repression of the media and civil society and government corruption.

In addition, there are few mechanisms in place to hold governments accountable for their political and economic decisions. Where normal channels are unavailable, they resort to untraditional methods for venting their frustrations. In particular, they have resourcefully used social media (and gotten around government censorship) to connect, organize themselves and mobilize protest movements.

Accountability in Donor Aid by the Rich Countries

The recent events have made it evident to Western powers that citizens of Arab countries are determined to shape their own destiny. But, the unfolding situation in the region warrants a re-examination of the West’s historical support for autocratic regimes. Let us look specifically at how donors have responded to the democratic deficit in the Middle East over the past decade.

On aggregate, as Figure 2 indicates, donors have been oblivious to poor democratic governance in the region. In fact, while Voice and Accountability have deteriorated over the past decade, aid increased significantly, even when excluding the ‘special case’ of Iraq from this sample (from US $6.2 billion to $10.5 billion). In fact, almost all of donor development aid is channeled to Middle East countries that have low democratic accountability by the standards of other developing countries.

Some may defend such aid allocations by resorting to the realpolitik argument that aid, including “development aid”, is given to Middle East countries not only to raise living standards, but also to achieve political and security objectives with non-democratic allies.

The first problem with this practice is that governance deficits tend to undermine development and job creation for the low income and youth strata of the population, and thus breed discontent. The second problem is that nowadays citizen-led revolutions against non-democratic regimes can unpredictably be sparked almost anywhere.  Once the spark is ignited, they dwarf any possible “propping up” effect that foreign aid may have in perpetuating these regimes during seemingly stable times.

The events in the Middle East are a rude reminder that it is high time to revamp donor aid strategies so to concretely elevate the priority of democratic governance in development assistance.

They are also a wake up call for analysts (us included) to revisit how ‘political stability’ and country risk is assessed and measured in undemocratic regimes, and it is a reminder that uncertainty and unpredictability needs to be taken seriously.

Against the background of the newly found power of the people and social media, the dramatic events that are unfolding are also a rude reminder that in the global race to write instant analysis as events begin to unfold, a rush to make predictions is risky especially when little attention is paid to the comparative data at hand.

*  This blog entry was drawn from a Commentary article in the Brookings website co-authored with Veronika Penciakova and Selsah Pasali.

Now Liu Xia, the wife of Liu Xiaobo, may have been placed under house arrest, according to a rights group and to a reported posting by her on Twitter.  Her virtual house arrest took place after her return from visiting her husband in prison, following word of Xiaobo winning the Nobel.  That he would be allowed to leave jail to attend the prize ceremony and collect the prize was thought to be unlikely.  Now it is even unclear whether she will be able to collect her husband’s prize.

After it became known by some that Liu Xiaobo had been awarded the Peace Prize on Friday, a gathering of bloggers took place in Beijing, which was broken up by police and over a dozen people were detained.  But most people in China were unaware of the fact that the Nobel Prize for Peace was awarded to Liu Xiaobo, since the Central Propaganda Department issued orders across China banning reporting of the news.

Meanwhile, today Iran’s security services captured and arrested two foreigners, after an interview with the son of Sakineh Mohammadi-Ashtiani, the woman that faces death for alleged adultery.  Ashtiani may still be stoned to death by the authorities, or put to death through other means, and her case has sparked protests worldwide.

While such news disappoint many, they do not shock.  Both countries share major deficits in their adherence of human rights, citizen voice, and democratic accountability.  Yet there are differences.   China’s governance performance is  more complex and multi-faceted than Iran’s.   China is a much bigger puzzle.

In brief, the Worldwide Governance Indicators (WGI) we have just released provide the similarities and differences, by focusing on six dimensions of governance, measured with data up to the end of 2009.

In terms of the ’Voice & Accountability’ dimension, both China and Iran rate very poorly, well within the bottom 20 countries worldwide, as seen in first set of twin bars in the chart below (for each governance dimension, the bar rating China is atop that of Iran, and the rating is expressed in percentile rank worldwide, among over 200 countries).

.

Yet while Iran’s performance is very poor in every dimension of governance, that is certainly not the case for China.  The performance of China in Government Effectiveness, for instance, is stellar among emerging ecomomies, while it has also made strides in terms of its quality of their Regulatory and Legal regimes.  By contrast, Iran rates among the bottom ten countries in the world on their quality of regulations, for instance.

Indeed, Iran performs poorly in the political, economic and institutional dimensions of governance.  China performs poorly in political governance, contrasting progress in economic governance (while significant challenges still remain on corruption control).

The economic damage to Iran from its wholesale subpar performance on governance is likely to be felt in the near term, not merely in the medium to  longer run.

By contrast, given the more complex (or mixed) performance of governance by China, it is more likely to affect its medium term economic prospects instead (even though the government’s reaction to the peace prize award attests to its own sensitivities and insecurities on this governance dimension at present).

But in due course, their rapid growth may taper off  if no governance reforms are implemented in the dimensions where its performance is subpar, such as human rights, voice and democratic accountability.