This chapter discusses the role of the major donors and governments in South Asia with regard to governance and development in the region. The World Bank leads much of the behavior of the donor community and is the most influential source of advice on all growth-related issues for South Asia. As a consequence, the approach, strategies and programs of the major donors (and their different perceptions) have a critical impact on the development effectiveness of aid through governance in South Asia. It is therefore necessary to discuss the basis of their advice and support. The World Bank relates “good governance” to the countries or societies

of South Asia as a whole and looks at the way in which power is exercised in the management of the economic and social resources that help improve development. The United Nations Development Programme’s (UNDP) notion of governance includes three separate but interconnected authorities, i.e. political, economic and administrative aspects. Exercise of these authorities should help manage the affairs of South Asia at different levels. ADB’s governance approaches include: (1) core governance; (2) sectoral governance; and (3) project governance. A Joint Country Assistance Strategy has been adopted in recent years and

the World Bank, the Asian Development Bank (ADB), the British Department for International Development (DFID), and the Official Development Assistance (ODA) of Japan (these four donors contribute more than 80 percent of total aid) and government officials organize a joint meeting to discuss the joint country assessment strategy for individual countries in South Asia. This coordinated effort defines a common outcome, strategies and an activity plan to avoid overlap in the development process in South Asia. The World Bank desk reviews, which form the basis for the baselines/targets for some of the indicators of development, demonstrate that some progress has been made towards meeting the standards of aid effectiveness set out in the Paris Declaration. However, various significant challenges remain. The main challenges and priorities for the future of South Asia are as follows.