Governments around the world spend trillions on public procurement each year for everything from office supplies to military equipment to infrastructure megaprojects like this $5 billion Panama Canal expansion.
By Kirby Bryan
For over a decade, the World Bank Group’s Doing Business index has served as quintessential tool for determining how well a country’s institutional infrastructure is suited to the promotion of a productive business environment. But something was missing. Businesses and governments interact on levels beyond permitting and regulation: the public sector can also be a client.
Public procurement can provide opportunities for corruption. When seeking lucrative public contracts, companies look for any opportunity they can take advantage of that will improve their ability to secure a successful bid. Unscrupulous government officials can use their influential positions to attain favors and gifts from businesses pursuing public procurement tenders.
In March 2015, the World Bank Group, in conjunction with the George Washington University Law School, held a release event for the first installment of its Benchmarking Public Procurement Index.
The adoption of good governance practices is beneficial to listed companies, unlisted companies, and family-owned enterprises.
Good governance practices strengthen companies by building relationships among investors, boards of directors, managers, and employees. Implementing corporate governance guidelines allows businesses to obtain capital at lower cost, enhances business strategy, and attracts the best human capital.
Corporate governances also promotes competitiveness in the marketplace and is an antidote to corruption. Effective corporate governance also helps ensures the integrity of business operations and strengthens the rule of law and democratic governance by promoting values of accountability and transparency.
In the last decade, Pakistan has experienced a sizeable increase in the number of unlisted companies, particularly family-owned organizations. These enterprises form the backbone of Pakistan’s economy and growth; the need for corporate governance guidelines for these particular types of companies has never been greater. Instituting good governance practices is particularly effective in overcoming the challenges many family-owned enterprises face.
CIPE partnered with the Pakistan Institute of Corporate Governance (PICG) and the Institute of Chartered Accountants of Pakistan to assess sectoral needs and develop the Corporate Governance Guide for Family-Owned Enterprises, the first guide of its type in Asia.
To learn more about the benefits of instituting good governance practices for family-owned enterprises and how one Pakistani company improved its governance and its performance, read the latest case study from the forthcoming collection of Strategies for Policy Reform.
Teodora Mihaylova is Research Coordinator at CIPE.
Program Officer Stephen Rosenlund discusses best practices in corporate governance based on CIPE’s experience in the MENA region.
On September 9-10 in Ramallah, I had the privilege of participating in a CIPE-supported training workshop on corporate governance with the leaders and technical staff of nine Palestinian chambers of commerce from the West Bank. This was an unprecedented gathering organized by our partner the Palestine Governance Institute (PGI) and the Federation of Chambers of Commerce, Industry, and Agriculture to activate the chambers as resources for their member firms on corporate governance matters.
The two-day training workshop immersed participants in applicable legal and regulatory frameworks, the role of oversight institutions, and best practices in corporate governance at the firm level. While the different requirements applicable to publicly traded and private companies were examined, presenters emphasized the imperative for all firms regardless of size or ownership structure to adopt sound corporate governance practices. Data from numerous studies show that investing in corporate governance is a good business decision that enhances the performance and sustainability of companies. In addition, it has a positive aggregate effect on society in the form of economic development.
Moreover, well-governed companies tend to act ethically — by resisting paying bribes, for example — and therefore reduce the amount of corruption in society. A private sector that has its own house in order is also better positioned to engage in dialogue with public officials to bring about needed policy, legal, and regulatory reforms that will improve the environment for business.
Business associations need strong governance systems and guiding principles in order to effectively serve their members and act as advocates for policy change. In Pakistan, business associations are mostly struggling to adapt effective governing mechanisms that could ease the path to successfully achieving their vision, mission, and objectives.
Societal norms are changing, the business environment is getting more complex and challenging, and following the principles of corporate governance should now be one of the foremost issues that business associations must address.
CIPE has a huge online library of resources and publications through which business associations can get instant guidance and support. In order to facilitate good governance principles within business associations, CIPE and the World Chambers Federation (WCF) developed a guide on Governance Principles for Business Associations and Chambers of Commerce. The guide was originally published in English and subsequently translated in to Arabic, French, Russian, Spanish and Dari languages.
To support and further simplify good governance principles in the country, CIPE Pakistan has produced an Urdu Translation of these principles (available here) for the benefit of business associations all across Pakistan that can be further guided with local language clarity.
Emad Sohail is a Senior Program Officer at CIPE Pakistan.
More than 98 percent of commercial entities in Palestine are not covered by existing corporate governance codes, which apply to companies listed on the Palestine Stock Exchange and commercial banks. Most of these are structured as family firms — whether in ownership or management — which creates special difficulties for corporate governance.
To address the thousands of family firms that form the heart and soul of the Palestinian private sector, CIPE partner the Palestine Governance Institute (PGI) recently published a Corporate Governance Manual for Family Firms (available in Arabic and English) with the Federation of Palestinian Chambers of Commerce, Industry and Agriculture.
This seminal publication — the first of its kind in Palestine — was informed by extensive consultations with local experts, family firms themselves, and other stakeholders including lawyers and academics.
PGI engaged in extensive outreach to the business community in developing these guidelines, including conducting a baseline assessment through interviews with over 100 owners and managers of family firms across the West Bank and Gaza.
Health care professionals in Egypt conduct a stakeholder analysis to help spell out governance principles for Egyptian hospitals.
A hip replacement in the United States, paid for out-of-pocket (i.e., without health insurance), would cost anywhere from $11,000 to $125,000, depending on what hospital you go to, according to a 2013 survey of 100 hospitals featured on National Public Radio. And that was among the hospitals that, when asked, could actually produce a quote – 40 of the 100 hospitals surveyed couldn’t quote a price at all.
Those fortunate enough to have insurance don’t need to worry about price-shopping. When I go to my primary care physician, I pay a $20 co-pay. (Under our previous insurance, provided by my wife’s former employer, it was $10. Why the difference? Who knows?) I have no idea how much my insurance company pays the doctor. I suppose I could find out, but… honestly? There’s really no compelling reason for me to do so. It’s $20 no matter who I see.
And it turns out that, even if there were more incentive for me to price-shop, more expensive hospitals aren’t necessarily better hospitals, according to a 2014 study.
Academics and development practitioners have long sought out commonalities of sustainable economic growth in different economies around the world. While there is no one formula for achieving economic growth and stability, inclusive growth and accountable governance have been central components of progress. Effective governance, while not traditionally thought of as part of an international development agenda, has come to be seen as an essential component of international economic development.
In the latest Economic Reform Feature Service article, consultant James Michel explores the complex relationship between good governance and economic development around the world. He looks at the ways in which academics and practical experience shape these two intertwined factors of development.