The Impact of Favouritism on the Business Climate: A Study on Wasta in Jordan
221 Pages Posted: 22 Feb 2013
Date Written: February 15, 2007
Favouritism is very common in the countries of the Middle East and North Africa, where it is usually referred to as "wasta" (connection). The study by Loewe et al. analyses the impact of wasta on the business climate. It presents the results of extensive empirical research conducted in Jordan providing evidence that wide-spread favouritism affects business-people in different ways. Investors with good wasta can speed up procedures, get exclusive access to services and information and even influence legislation to their advantage. In addition, entrepreneurs tend to invest their time and money in social relations rather than productive capital, because their success depends on their wasta rather than the quality of their products.
The study furthermore argues that the fight against favouritism must address four factors: inform people about the negative impact of favouritism on economic development, (ii) give people incentives to stop using their wasta, (iii) delink the use of wasta in people's thinking from beloved socio-cultural norms such as loyalty and solidarity and (iv) reform Jordan's administrative and political system, which lacks transparency and accountability on all levels.
Keywords: Jordan, corruption, favouritism, wasta, tribalism, authoritarianism, Islam
JEL Classification: H57, H32, L16, L51
Suggested Citation: Suggested Citation
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By Markus Loewe