Exploring incentives for transparency in developing countries

[Summary: brief reflections on the dynamics of transparency in developing countries]

Doug Hadden of FreeBalance (developers of Public Financial Management software) has posed the question “What are the Incentives for Transparency in Developing Country Governments?“. Doug notes that many of their developing countries customers have been interested in implementing transparency portals such as Transparency.gov.tl, and transparency has been a major topic of conversation at their annual user group meeting.

My initial draft of a comment became rather long, so here are a few reflections in reply to that question by way of a blog post.

Framing the question

First, we need to identify whether a distinction between developed and developing countries has particular relevance to this question. There are three main areas where the distinction could be being drawn: degree of political freedoms and democracy; levels of corruption; and state capacity and effectiveness. Malesky et al. comment on the fact that we might expect the dynamics of transparency initiatives to be different in more authoritarian regimes. We might anticipate both that authoritarian governments have less incentive to pursue transparency, and that if transparency is pursued, it is less likely to be effective in changing policy and implementation outcomes, further undermining the case for it’s adoption. A similar incentive issue may exist for regimes with high levels of corruption. If political elites are seen to be corrupt, then it may be surprising to see those elites adopt and pursue transparency policies. Lastly, on the question of state effectiveness, it might be argued that it is surprising that a democratic state with limited capacity adopts transparency as a policy instrument over other available public sector reforms. In his chapter in Corruption and Democracy in Brazil Bruno Speck discusses the importance of empowered audit and oversight institutions to ensuring effective use of public finance. Transparency may be a means by which actors outside the state can put things on the agenda of empowered institutions, but without effective state mechanisms to enforce compliance with laws once problems are identified, it may look to be a flawed policy tool. All these distinctions (levels of freedom, corruption and state capacity) might have some degree of correlation with the development status of a country, though the line is not clear cut. Alexandru Grigorescu’s paper on international organisations and government transparency points to one further distinction worth noting: the higher levels of involvement of international organisations in developing countries.

Secondly, we need to identify what sort of transparency we are talking about. David Held suggests we need to distinguish four directions of transparency: upwards (hierarchical relationships; when the superior can see the actions of the subordinate), downwards (when the ruled can see the behaviour/results of their rulers; agencies can see behaviour up the management chain); outwards (when agents inside an organisation can see what is happening outside it); and inwards (when those outside can observe what is happening inside the organisation). Using these categories we can interrogate how a particular transparency initiative is functioning. For example, a transparency portal may be giving inwards and upwards transparency to government, but it may not only be giving new insights to citizens, it may also be allowing agencies who previously struggled to get hold of information due to bureaucratic blocks in mid-level agencies or departments, to more effectively access information they need to do their jobs. It is also important to answer the question ‘transparency of what?’. Transparency of outdated information, or information with little political salience is dramatically different from releasing up-to-date information on the most recent public spending, such as occurs through Brazil’s transparency portal.

With these distinctions in mind, what might some of the incentives for transparency be? All the following are hypothesis only, and more work would be needed to track down data to explore them more, or studies that might look at these effects in more depth.

1) The figleaf
Starting with a sceptical suggestion. Publishing low-salience information with a large fanfare can be a good way to gain attention and initial credibility without actually facing high political costs. Similarly, in regimes with low state effectiveness, where corrupt activity isn’t captured in the data, or there are no balancing audit and reconciliation mechanisms such as exist in the Extractives Industry Transparency Initiative, then the potential credibility gain from developing a transparency initiative outweighs the potential risks. With growing international focus on transparency initiative, the reputation pay off from an adopting an initiative may be high right now, and may allow other more substantive reforms to be sidelined.

2) International and external pressure
Less sceptically, we might see transparency initiative adoption as a genuine measure by governments, but primarily taking place in response to international pressure or funding. This might be from international agencies, as donors fund and require transparency and governance reforms. Aid Transparency portals in particular may come down to pressure from donors to have accountability on how funds are being spent. Or it might be from business, and markets, as assessments of doing business in a country are affected by the degree of transparency.

3) Bottom up citizen and political pressure
Citizens may be demanding transparency. Certainly in the global development of Right to Information legislation, bottom up citizen pressure has played a significant role. Where democratic mechanisms are operating, then citizen pressure can provide incentives for greater transparency. Similarly, as Francis Maude often states, political parties in opposition are often advocates of transparency.

4) Improving information flow
Effective states need to process a lot of information, and transfer it between many different organisations and agencies. Doing this inside the state, in access-controlled ways, through person-to-person relationships can be complex and costly, and involve lots of interoperable IT systems. By contrast, with open data, you place data online in a standard format, and then anyone who needs it can come and take a copy (or so the theory goes; note that feedback loops from the previous person-to-person relationships fall out of the picture here). Publishing data transparently can get around bottlenecks in information exchange. This may be particularly important when public services are being delivered by lots of non-state actors who could not be brought inside government systems in any case.

This is certainly part of the idea behind the International Aid Transparency Initiative, which seeks to ensure aid receiving governments and agencies can get a view of available resources without having to spend considerable labour requesting and reconciling information from many different sources. Here, the goal is efficiency through outwards and horizontal transparency, and other forms of upwards transparency and visibility of data to citizens may be a by-product.

5) Addressing principle-agent problems
Principle-Agent problems concern the challenges of a principal (e.g. the government;) to motivate an agent (e.g. a contractor;) to act in the interests of the principlal, rather than in the agents self-interest. There are all sorts of principal-agent problems at work in government. For example, the citizen as principal, trying to get government as agent to act in their interests; central government as principle, trying to get an implementing agency to act in their interest; or donor as principle, trying to get a government to act in their interest. Transparency can play a role in all of these, though the form the transparency may take can vary.

Governments are not monolithic. Corruption benefits certain actors in government, and not others. Transparency can be a policy that one area of government uses to secure the behaviour of another, through allowing parties outside of government to provide the scrutiny or political pressure needed to address an issue. The nature of transparency mandates is interesting to explore here. Transparency in one area of government can also empower another. For example, both the UK and China have sought to increased the transparency of local government. This may increase citizen oversight of government, but it can also increase upwards transparency of the periphery to the centre, strengthening central government capacity.

Exploring further
This post has taken a fairly general view of some of the dynamics that might be in play in a decision to adopt a transparency initiative. There are undoubtedly other significant dynamics I’ve missed. And going with my own point on distinguishing both the type and subject of data being made more transparent, any more detailed account is likely to need to be about transparency in particular domains rather than general.

Of course, looking back I suspect I may have misread Doug’s question, which could have been asking more for arguments that can be used to convince governments to adopt transparency, rather than an analytical look. However, I hope some persuasive arguments in favour of transparency can also be distilled from the above.

Grigorescu, A. (2003). International Organizations and Government Transparency: Linking the International and Domestic Realms. International Studies Quarterly, 47, 643–667.

Malesky, E., Schuler, P., & Tran, A. (2012). The Adverse Effects of Sunshine: A Field Experiment on Legislative Transparency in an Authoritarian Assembly. American Political Science Review, 106(4). doi:10.1017/S0003055412000408

Power, T. J., & Taylor, M. M. (2011). Corruption and Democracy in Brazil: The struggle for accountability. University of Notre Dame.


  1. Doug Hadden

    This is a very thoughtful comprehensive response. A bit difficult to fit into a tweet.

    My view is that transparency can be a catalyst for good governance when in combination with other factors. Conditions can conspire to create vicious circles of bad governance or virtuous circles of good governance.

    The main purpose of my question was to determine the incentives for government leaders in developing countries for fiscal and other forms of transparency. There are powerful stereotypes in the West that government leaders have little or no incentive for transparency without significant international pressure. This stereotype assumes that all government leaders in developing countries are corrupt all of the time. One just has to look at the narrative about foreign aid in the press. (On an aside, the improvement in aid transparency is giving valuable lessons on what works and what doesn’t, but the press seems fixated on the what doesn’t).

    FreeBalance provides software for public financial management. We have governments for fragile states to G8 running our software but we see our mission as improving governance in developing countries. Our International Steering Committee meetings are more about advancing knowledge in governance, sharing good practices and learning about emerging trends for product planning. This structure is quite a bit different from what traditional software companies do.

    What we have seen among governments is an asymmetrical adoption of transparency mechanisms. We have also seen adoption of good practices that are not aligned with government capacity. (For example, PEFA assessments show some fragile states following more international public sector standards and delivering timely financial statements better than mid-developed countries.) Transparency has been a major driver among some of our customers for initiatives that sometimes involves us. There’s international momentum through IATI, EITI, OGP, open contracting etc. We’re hoping to help the attendees of our conference to prepare for transparency demands by understanding the conditions by which senior leaders and politicians decide that transparency initiatives should be adopted. And, what the types of transparency (revenue, aid, budget, procurement etc.) that are likely to be prioritized based on the country condition.

  2. Alan Hudson

    Doug – Are you in touch with the folks at the Global Initiative for Fiscal Transparency eg. Warren Krafchik?

    They are working on exactly this issue so it would be good for you to link up if you haven’t already.

    If you’re not in touch and want an intro, give me a shout.

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Open Data in Developing Countries

The focus of my work is currently on the Exploring the Emerging Impacts of Open Data in Developing Countries (ODDC) project with the Web Foundation.

MSc – Open Data & Democracy

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