The International Labour Organisation (ILO) has issued a stark warning that governance systems across the world are stagnating — and in many cases deteriorating — with potentially serious consequences for business confidence, foreign investment and long-term economic stability.
In a newly released report examining nearly three decades of governance data across 208 economies, the ILO found that while governments continue to pursue reforms, meaningful progress remains limited and fragile, with setbacks occurring more frequently than improvements.
The report, “Governance, hard to build, easy to erode: Global trends, business implications and the role of employer and business membership organisations,” paints a sobering picture of the state of governance worldwide, warning that weak institutions and declining political accountability are undermining economic predictability and investor confidence.
According to the ILO, only 7.2 per cent of the world’s economies currently operate in what it classifies as “sound” governance environments — systems marked by strong institutions, policy consistency and high levels of predictability. By contrast, 52.9 per cent of economies function under conditions that generate uncertainty for business and investment.
The findings reveal a troubling pattern: governance is far easier to lose than it is to build.
“Governance is highly persistent: countries that performed well three decades ago tend to remain so today, while those with weaker institutions have struggled to improve,” the report states.
But while governance systems tend to remain entrenched over time, the ILO found that when change does occur, it is far more likely to be negative than positive.
“Progress is possible, but decline is more common,” the report warns, noting that nearly one-third of countries previously ranked among the world’s top governance performers have seen their positions weaken.
Of particular concern is political governance — accountability, political stability and institutional checks on executive authority — which the report identifies as the most vulnerable area.
While legal and regulatory systems can be strengthened over time, the ILO said political governance is especially susceptible to erosion in environments marked by political polarization, democratic backsliding and weakened oversight mechanisms.
“The message for reformers is that governance gains must be actively defended, and cannot be taken for granted,” the report emphasized.
The ILO also found a direct relationship between governance quality and investment flows, warning that countries with unstable or unpredictable governance environments struggle to attract foreign direct investment.
“Countries with stronger, more predictable governance environments consistently receive higher levels of foreign direct investment,” the report states, even after adjusting for regional and global economic trends.
While market size, infrastructure and macroeconomic conditions remain important factors, the report stresses that governance remains foundational to converting economic potential into real investment and job creation.
Meanwhile, in Guyana, many of the governance weaknesses highlighted by the ILO are increasingly reflected in the country’s own political and economic landscape. Governance concerns have become more pronounced through weakening democratic practices, persistent disregard for workers’ rights, and the marginalisation of organised labour, even as bodies such as the Guyana Trades Union Congress continue to press for fair wages, collective bargaining and social justice. Exclusionary politics and ethnically polarised governance have deepened political and social tensions, while corruption, violent crime and weak institutional accountability continue to erode public trust.
Despite unprecedented oil wealth generated through production led by ExxonMobil and its partners, poverty and extreme poverty remain deeply entrenched, with low wages and a rising cost of living leaving vulnerable communities struggling to survive in an economy flush with petroleum revenues. The infrequent sittings of the Parliament of Guyana have also raised concerns about weakened democratic oversight, limiting scrutiny of executive power at a time when equitable governance and inclusive development are increasingly urgent.
Beyond governments, the ILO report also examined the role of employer and business membership organisations (EBMOs), arguing that they are critical institutional actors in sustaining governance reforms.
Using data from 166 organisations worldwide, the ILO introduced an EBMO Governance Index to measure institutional autonomy, internal governance and organisational capacity.
Its findings revealed a troubling contradiction: while many business organisations have secured formal independence from governments, many remain too weak institutionally to effectively influence policy.
“Most EBMOs have achieved a significant degree of formal independence from government. However, many lack the capacity to turn that independence into effective advocacy and sustained policy engagement,” the report found.
That weakness is particularly acute in developing and emerging economies, where more than 83 per cent of surveyed organisations reported limited operational capacity.
The ILO warned that strengthening those institutions is essential not only for business advocacy but for protecting governance gains over time.
Deborah France-Massin, Director of the ILO Bureau for Employers’ Activities, underscored the broader economic implications of governance erosion.
“Governance underpins sustainable enterprises, decent work, and inclusive growth. Building strong institutions requires time and commitment, and progress can be fragile. Employers’ organizations play a key role by both advocating for and embodying good governance,” France-Massin said.
The report concludes with a clear warning to governments: reform cannot be cosmetic or politically convenient. It must address the weakest parts of governance systems, be built for resilience rather than short-term visibility, and include safeguards against institutional backsliding.
