Sunday, December 30, 2007

Government Accountability and the elimination of Extra-Legal Norms:

Institute for Trade Standards and Sustainable Development

By: Osman Aziz

Efforts undertaken by the World Bank, IMF, and other international financial institutions to analyze the nature of government accountability and inclusiveness in the Middle East have been effective insofar that they have analyzed the situation in MENA nations under normative terms. In their analysis, the question of government accountability and corruption hints to the notion of extra-legality, a concept enshrined in Hernando De Soto’s “dead capital”. In the World Bank’s diagnosis of MENA nations in 2003, they concluded that the question of spurring greater accountability and transparency in Middle Eastern nations hinged on the nations ability to undo the bureaucratic hamstringing of the private sector.

“Improving the inclusiveness and accountability of governance mechanisms in MENA will help in three ways: by reducing the scope for persistently arbitrary or distorted policies, by improving bureaucratic performance and thus reducing the uncertainties and costs of doing business, and by improving the delivery of public services for businesses to be productive.”[1]

The burgeoning debate surrounding sustainability in not only the Middle East, but around the world is a debate that encircles more than simply economic development and the mechanics that provide for it. Questions of sustainability also include legal paradigms, cultural norms, and other certain norms that are indelibly tied to the region in question. Although the concept of development and progress harbors undertones that cut across cultures and borders, the considerations, both historically and traditionally, must be taken when assessing a region that possesses a rich history entrenched in a legal tradition that held reign for hundreds of years. The issue of Sharia, a tense topic that elicits misrepresented notions of its “incongruous” position in the modern world. Research up to this point in analyzing certain methodologies presented under Sharia in relation to sustainable development have lacked any real relation to the traditional methods of analyzing the body of law and its respective notions of land right and tenure regiments (concepts such as mewat, waqf, mu-amalat, and qist). Regardless of the debate in favor or in opposition, the failure of modern movements such as Arab nationalism, socialism, pan-Arabism, and others is evidence unto itself that a new paradigm must take precedence that holds the notions of private property and free trade in greater respect than current regimes.

Hernando De Soto’s seminal work, The Other Path, was written in response to the socialist ideology of the Shining Path, a terrorist organization with its allegiance firmly rooted in Maoism. In it he argues that the plight of rural farmers is directly correlated with the government’s inability to enable the average citizen with a set of legal rights wherein he/she may be able to leverage, mortgage, or accrue equity on their land. He also claims that if the average citizen was enabled with such economic freedoms, they could become, in his words, budding entrepreneurs. His thesis and study on Peru garnered widespread attention and was quickly emulated elsewhere in other countries. A case diagnosis of Cairo, Egypt found that 92% of Cairenes hold their real estate extralegally (or in other words, outside the formal realm of law), and that 82% of entrepreneurs operate extralegally. Further analysis reveals that nearly 248 billion dollars in assets exist extralegally, capital that could be invested in business ventures.[2] These findings, coupled with the fact that current legal regimes that exist in MENA nations are of a foreign source (either French Civil or British Common Law) presents not only a dilemma religiously, but of the sovereignty of a region that steeped in cultural and societal norms. The question then becomes: Has the introduction of foreign norms contributed to the ascendancy of extralegal institutions, and furthermore, what are these institutions exactly?

The OECD’s work in 2007 regarding the relevancy of societal norms and governing institutions outlined a basic framework for the definition of such norms. In their work “Informal Institutions: How Social Norms Help or Hinder Development,” Johannes J├╝tting, Denis Drechsler, Sebastian Bartsch and Indra de Soysa level disparate criticisms, stating that informal institutions are either the result of a poor effort on the part of the government for establishing foreign norms in countries with their own traditions, or the fault of the citizens of such nations for not investing trust within the systems introduced to them by their governments.

In emerging and developing countries, formal institutions such as laws, regulations and legally enforced property rights are usually poorly established. Informal institutions based on trust, solidarity and social capital – such as family and kinship structures, traditions, civil and social norms – often substitute for, compete with or complement formal institutions. In fact, informal institutions are of high importance and can help or hinder the development process: ignoring them can be costly for partner and donor countries alike.”[3]

The particular paradigm presented by the MENA region poses a serious reconsideration of the institutions that currently exist. De Soto’s disturbing case study of Egypt and the extraordinary inefficiencies that its governmental institutions exude is evidence unto itself of either the nation’s inability to successfully understand the local customs, or the negligence of the average citizen in relation to the law. Regardless, the existing systems in the MENA nations have not duly addressed the issue of extra-legality. If this is a matter of foreign or alien forms of governance modeled after western secularist notions, then a more thorough analysis of the role of religion in the everyday administration of social interactions needs to be taken into account. Certain phenomenon’s, embodied by the duality legal systems present in both the UAE and Malaysia present precedence’s that can serve to widen an unconsidered debate.

[1] “Better Governance for Development in the Middle East and North AfricaThe World Bank Group (2003)

[2] “Dead Capital in EgyptILD. (2007)

[3] Organization for Economic Cooperation and Development. Development Centre Studies Informal Institutions: HOW SOCIAL NORMS HELP OR HINDER DEVELOPMENT. (2007)

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