# **Why Data Systems Matter**

The long run benefits of good data systems and data transparency are considerable (Islam and Lederman, 2020; World Bank (2021) - WDR 2021: Data for Better Lives). There are several channels through which the quality of the data ecosystem could aid development. First, data serves as the basis for policy and reforms. Policies can only be as good as the data they are based on. At a fundamental level, data is about records. Take the example of a business. A manager has the primary goal of raising profits. To achieve this, performance must be benchmarked historically and compared with competitors. Collateral must be evaluated and leveraged to access financing to pursue new ventures. Risk and reward must be balanced. Investors need to be enticed. Without any record keeping, none of these can be achieved. A similar set of challenges face governments and policy makers in the MENA region. Countries need to grow, and to expand options, data must be harnessed to provide guidance. Countries need to compare with past performance and benchmark against other countries at similar levels of development. Countries with high quality information are better able to make better decisions. Through data and evaluation, existing policies may be reformed and refined, while new policies may be experimentally evaluated.

Second, data that is accessible to a wider group of agents can generate better policies and reforms. A powerful tool confined to the tool shed has limited value. When data is accompanied by a large base of sophisticated users, there are substantial expansions in the frontier of knowledge. As researchers test hypotheses, debate and dispute findings from each other, while establishing robust facts and relationships using the same data, the best ideas and new pathways of addressing challenges can emerge. This is the process where simple data can be turned into a stock of knowledge that could generate and direct further knowledge creation and better policy making. It is not surprising that richer economies are researched more than poorer economies. Publications in top ranking journals in the economics profession are skewed towards wealthier economies, which themselves capitalize on this analysis to better understand and improve their economies. Less wealthy economies, on the other hand, cannot benefit from such knowledge, largely because of the lack of data accessibility.

Third, when data is poor or unavailable, the gap between perceptions and reality may grow. Important reforms may lead to real welfare improvements but may have little impact on public perceptions as there is limited data tracking such improvements. These perceptions may foster a narrative resulting in frustrations that manifest in the form of social protests and unrest. Similarly, if data is of dubious quality, the public may lose confidence in such information and may not alter their perceptions despite positive findings from the data. This may contribute to a lack of trust between citizens and their governments, weakening the social contract. More importantly, once a government treads down the path of unreliable or limited data, it may be challenging to trek back. The public may be less willing to trust information from the government, and thus perceptions are calcified and difficult to change resulting in economies that are more prone to social upheavals.

However, for data to inform policy, availability and accessibility of good quality data is necessary but not enough. Several institutions play an important role in facilitating debate fostered by data to ensure policy is an outcome of the process and the public takes ownership of this debate. The process typically resembles the following path. Data is first generated which is not easily digestible by the public at large. Academics generate knowledge from the data that fosters debate among themselves. Think tanks and policy makers join in. Media institutions communicate the information to the public at large who then participate and take ownership of the debate. The outcome of this process is hopefully an optimal set of policies that promote overall welfare. Each of the institutions is critical in fostering and enveloping the public into meaningful debate. Failure of the media to inform the public, or the absence of think tanks in the process would limit the value of information in guiding policy and diminish the returns of investment in data. All the parts must move together for the data ecosystem to be effective.

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