Issue No.587
Economy
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23 -29 May 2002 Issue No.587 Economy |
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Ever try to get through the labyrinth of setting up a project in any of Egypt's new industrial cities? Moustafa Kamel El- Sayed, director of Cairo University's Centre for the Study of Developing Countries, describes it as a complex process that requires the approval of at least 16 different authorities. "These regulations affect investment and mean more expenses," he says. It is such elaborate business registration requirements and tangled laws, the World Bank's World Development Report 2002 says, that hurt poor people and hinder social and economic development.
The report, entitled "Building Institutions for Markets," calls for institutional reform. It defines institutions as rules, enforcement mechanisms and organisations. "Institutions range from unwritten customs and traditions to complex legal codes that regulate international commerce," explains Gamal El-Kibbi, Chief Economist with the World Bank and vice president of the World Bank's Cairo office. Speaking at a recent seminar discussing the findings of the report, he said that reforming institutions and creating new institutions suited to local needs could "dramatically increase incomes and reduce poverty."
This year's report builds on last year's, which also stood in as the World Bank's report on poverty, issued once a decade. While last year's report said that to alleviate poverty, institutions have to make markets work for the poor, El-Kibbi said that this year's report looks at how the poor could be helped to take more advantage of opportunities.
Among the issues tapped by the report is that of effective dispute resolution. In analysing manufacturing firms in eight African countries, the report finds that courts tend to be slow and that the absence of contract enforcement mechanisms has hindered the growth of firms. In the meantime, in countries where the legal system was more developed and helped settle market-related disputes, firms functioned better.
"There is no lack of proper laws in the Middle East," El- Kibbi said. "Enforcement is the problem."
Land titling is another issue which the report says needs to be addressed. El-Kibbi said registering ownership of land was a costly and complex procedure for the poor. This must be dealt with. "Without clear title to their land, poor farmers are unable to offer it as collateral and may be discouraged from investing in improvements, such as better drainage or irrigation," he explained.
The role of the media in disseminating information was also examined by the report. According to El-Kibbi, better information flows "increased public demand for more effective institutions."
To reform institutions to serve the interests of the poor best, El-Kibbi said that "we need to capitalise on what we have in every culture. local circumstances and traditions must be taken into account."
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