In other words, the accountability is the price that institution pays for its independence. In democracies, every independent institution or 3 organization is accountable to the public and to its institutional stakeholders . Third, the participation principle ensures that every person in the system, in one way or the other, has 4 a voice in the decision-making process . 1  AusAID, (April, 2003). “Economic Governance and the Asian Crisis”. Quality Assurance Series. 2  United Nations, Economic and Social Commission for Asia and the Pacific. “What is Good Governance”  3  Ibid. 4  AusAID, (April, 2003). “Economic Governance and the Asian Crisis”. Quality Assurance Series. BIS Review 35/2007  1  And last but not least, good governance requires a fair legal framework and impartial enforcement of this legal system that protects property and individual rights and constitutes a strong base for prudent 5 policy-making . This legal structure assigns the principle of the rule of law. Distinguished guests, The analysis of good governance brings me directly to the question of why good governance is important. The good governance provides key institutions and policies for the equitable and efficient allocation of 6 resources, both labour and capital . To put it differently, it allows an economy to yield higher growth rates by using the same amount of factors of production. The strengthened economic governance across a broad spectrum of policy, administrative and institutional issues, is now widely accepted as a key factor in rebuilding domestic and international 7 confidence in an economy .

There are also other challenges, technical in nature, against the importance of economic governance, 9 such as causality problems and what is called the missing variable threats . However, in the view of our experience in the Turkish economy during the last couple of years, these counter arguments do not provide evidences strong enough to challenge the importance of good governance for economic and social prosperity. Distinguished guests, Until recently, Turkey had displayed disappointing performance in good governance principles compared to other emerging economies. In 2000, according to the World Bank’s calculations, Turkey ranked 134 among 193 countries in governance indicators. The thirty-years of high and chronic inflation, the macroeconomic instability and the subsequent crises, the delays in structural reforms, and the poor capability of institutions to deliver prudent policies and to initiate structural breakdown have all been the main determinants of this poor governance structure. 5  United Nations, Economic and Social Commission for Asia and the Pacific. “What is Good Governance”  6  Brouwer, G. (December 2003). “Macroeconomics and Governance”, Treasury Working Paper. 2003-4. 7  Australian Economic and Financial Management Initiative. “Economic Governance”. 8  AusAID, (April, 2003). “Economic Governance and the Asian Crisis”. Quality Assurance Series. 9  Avellaneda, S. D. (May 2006). “Good Governance, Institutions and Economic Development”  2  BIS Review 35/2007  However, after 2001, Turkey has launched one of the largest structural changes in its economy and put significant efforts into implementing good governance principles and searching for a new institutional matrix.