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Decision-making for growth and development

Decision-making and implementation are important processes for the economic development in developing countries. The states are confronted with unique problems and issues and its functionaries are supposed to deal and tackle these problems confronting the citizens. For example, tax payers may be denied benefit of tax exemptions, landowners may not be paid compensation in respect of acquired land, and contractors may be denied payment in respect of supplies of goods and services made. There are numerous other issues which require attention of the state functionaries and all this requires attitude of good governance for to make progress and economic development.

I remember an event relating to problem solving and good governance; I required a bank certificate of good standing regarding an admission decision. I approached the bank and the teller very blankly told me that it is not possible to issue the required certificate within the given deadline as the decision makers may take weeks to decide such requests. I asked the teller to take me to the Bank manager, the teller directed me where to visit the bank manger. I approached him, he looked towards me questioning the purpose of my visit, I told him the problem and requested for to issue the certificate of a good standing with the Bank. He again looked towards me for a moment and then in the next few seconds prepared the required document and handed it over to me. It was such a nice gesture of a decision-making that I remember it even today: an example of good governance.

Decision-making in other words is problem solving. It is a form of delivery of state’s institutional services, that’s why quick decision-making reduces the conflict and an environment of creativity is ushered in for growth and development. The society in this sense represents like a client to state, the delivery of state services is however dependent on the behaviour and attitude of the service provider.

If we look in the past we observe absence of conflict in society and the state; the state institutions were quick in decision-making in those days. It may be noted that a quick decision may be right or wrong but the service seeker stands satisfied if he knows the outcome of his representation. Because where a service seeker timely knows that his rights or interests are going to be sorted out in one or other way, he feels satisfied as he can opt for other options relating to his business. But unfortunately nowadays the state institutions are reluctant to make quick and timely decisions. They wait for someone to come from outside to resolve the issues, but it never happens. This attitude on the part of decision makers make the value of goods and services more costly and in many cases the businesses close down as they do not remain competitive.

Someone narrated an event which led to detention of goods of an oil company by one of the law enforcing agency. The company voluntarily removed the objection raised against them, and sought release of their goods. Unfortunately, no one in the agency had the courage to release the goods despite no liability. The company sought court’s interference, and these proceedings too were delayed by the state functionaries by refusing to co-operate even with the legal system by objecting to the proceedings on one or the other pretext.

The company again approached the agency in a good faith and requested for the release of their goods as no liability stood due against them, but the agency continued to delay the process by mischievous tactics, despite the fact that the company explained that no liability stood due against them, and there was no cause to detain the goods but the agency refused to release the goods for the reasons best known to them.

The purpose to narrate these events is to tell the readers that how the state functionaries at times create hurdles and difficulties for businesses to operate. These are the kinds of newly developed attitudes and tactics to deprive the people of their legitimate rights. And such attitudes kill the initiative and drive in businesses.

Decision-making per se such has assumed an important role in the developing countries. What is decision-making? In simple term, it is adjudication of claims of the subject. These claims are to be settled within the framework of law. And the law usually defines the parameters, why then state functionaries shirk their responsibilities?

On the other hand, there are mistakes on the part of businesses too who did fail to do their homework to determine the ensuing liabilities and responsibilities.

The biggest mistake that I see among many young entrepreneurs is the lack of clarity in defining options for opportunities they intend to target and in what manner. For example, in a classic thought experiment, physicist Erwin Schrödinger supposed that a cat could be simultaneously alive and dead if its fate was dependent on the unobserved state of a quantum system. The entrepreneurs, who are our number one drivers of growth, should always be able to achieve success for their ventures by keeping them alive. But a company’s fate is dependent on unknown factors: the company thus should be prepared for that and follow the winning path? That is why the initial and quick decisions are usually made with very limited information may be leading to a highly uncertain outcome. But they are desirable.

The natural psychological response to this dilemma is that many inexperienced entrepreneurs simply do not make a definitive choice to run multiple options at the same time. But believing that the cat is still alive somewhere in the flurry of activities is a fallacy. With limited resources, one is risking to running out of capital before achieving important targets to keep the business alive.

The answer to this conundrum feels unnatural, but it involves making decisions quickly and resolutely with limited information. What’s often not obvious is that if you move fast, you have greater opportunity to recover from mistakes and try another option should the first choice not pan out.

In this background we usually strongly criticise the authoritarian transition, however, a general development strategy depends on the existence of a competent state system with significant capacity to manage policies. These states represent a category of countries which do have good knowledge base. It may however be noted that many authoritarian states are not interested in rule of law, may be due to corrupt practices and also do not pursue good governance per se. In other cases, these developing states though do pursue pro-development policies yet lack prompt decision-making and rules of good governance.

That is why many developing countries cannot use economic growth and state-building as entry-points for a broader development strategy. Thus the quality of democracy is a potential entry-point to strengthening rule of law, and down the road, improving economic performance. The rising quantity and quality of democratic participation coupled with legal changes devolving greater power to local decision-makers have had the effect of increasing the growth and accountability of politicians.

There may be a set of cases where economic growth, not underpinned by developmental state policies just enough for good governance, may become a platform for social and economic development. The current governance orthodoxy states that good institutions cause growth, institutional reform lead to an entry point for development. Fixing the problem of corruption and democratic accountability in developing countries is a daunting task at present. On the other hand, good governance is endogenous to growth and it may be better positioned in the reforms agenda.

Zafar Azeem, "Decision-making for growth and development," Business Recorder. 2016-10-01.
Keywords: Economics , Economic development , Common good , Good faith , Developed attitudes , Quick decisions , Good governance , Accountability