This paper attempts to analyze governance systems in Southeast Asia and proposes some
policy suggestions that can improve governance practices in the region. It also discusses
the links between governance and official development assistance and the role of the
Japan Bank for International Cooperation. To put the discussion on governance systems
in a proper context, the paper discusses the governance and growth nexus in Southeast
Asia; describes the operating governance systems in Southeast Asia; analyzes economic
governance, more specifically in the areas of economic management and growth, revenue
generation, social spending, access to services, cost of doing business, and corporate
governance; and examines political governance, focusing on the rule of law and judicial
independence, conflict management, and voice participation. Regardless of level of
development, Southeast Asian countries need to establish and strengthen their
transparency and accountability structures, both in the public and private sectors, in order
to continue the momentum for broad-based growth. It is also necessary to strengthen the
fiscal autonomy of their sub-national units, and provide more room for participation by
civil society groups. More responsive and simplified regulatory structures are needed,
and so are strong law enforcement mechanisms. The rise of ethnic tensions argues for
better peace-building institutions to narrow the gap between groups. In all these, the
ultimate challenge lies in seeking allies and building constituencies for reform.
To make ODA better managed and more effective, donors must work in partnership (that
is, have a common basket) rather than in competition. Donors can also enhance the value
of aid by increasingly providing ideas and not just goods, untying aid and allowing
recipient countries to take “ownership” and greater flexibility in the use of aid. For
Japanese development assistance, in particular, Japanese aid agencies must adopt a
strategic approach to assisting poverty reduction in the poorer countries of Southeast
Asia, while extending their concessional window to middle-income countries. Japan can
do well in providing “ideas aid” based on the Japanese experience. Japanese ODA can
have higher leverage if an increasing part of the aid is used for institution building and
reforms in governance.
