The Impact of Favouritism on the Business Climate: A Study on Wasta in Jordan

221 Pages Posted: 22 Feb 2013

See all articles by Markus Loewe

Markus Loewe

German Development Institute/Deutsches Institut für Entwicklungspolitik (DIE)

Jonas Blume

Kreditanstalt für Wiederaufbau (KFW) - KfW Development Bank

Verena Schönleber

Independent

Stella Seibert

Independent

Johanna Speer

Humboldt University Berlin

Christian Voss

DEG-German Investment and Development Company

Date Written: February 15, 2007

Abstract

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

Loewe, Markus and Blume, Jonas and Schönleber, Verena and Seibert, Stella and Speer, Johanna and Voss, Christian, The Impact of Favouritism on the Business Climate: A Study on Wasta in Jordan (February 15, 2007). Available at SSRN: https://ssrn.com/abstract=2218821 or http://dx.doi.org/10.2139/ssrn.2218821

Markus Loewe (Contact Author)

German Development Institute/Deutsches Institut für Entwicklungspolitik (DIE) ( email )

Tulpenfeld 6
Bonn, 53113
Germany
+49 0 228 94927 0 (Phone)
+49 0 228 94927 130 (Fax)

HOME PAGE: http://www.die-gdi.de/CMS-Homepage/openwebcms3.nsf/(ynDK_contentByKey)/ENTR-7ARHJ3?OpenDocument&nav=

Jonas Blume

Kreditanstalt für Wiederaufbau (KFW) - KfW Development Bank ( email )

Palmengartenstr. 5-9
Frankfurt, 60325
Germany

Verena Schönleber

Independent ( email )

Stella Seibert

Independent ( email )

Johanna Speer

Humboldt University Berlin ( email )

Luisenstrasse 53
Berlin, 10099
Germany

HOME PAGE: http://www.agrar.hu-berlin.de/struktur-en/institute-en/wisola-en/fg-en/koopwiss-en/mitarbeiter/johan

Christian Voss

DEG-German Investment and Development Company ( email )

Postfach 45 03 40
D-50878 Cologne
United States

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