No Rule of Law, No FDI

Without striving for an independent and transparent legal system, Jordan will struggle to attract desperately needed FDI.

“We cannot achieve sustainable development, empower our creative youth or successfully execute our development plans unless we develop state administration and enhance the rule of law through strengthening the principles of justice, equality, and transparency,” HM King Abdullah wrote in his recent sixth discussion paper.

One of the most important indicators in any global competitiveness report is the rule of law. It’s one of the main determinants of the movement of foreign direct investment (FDI). Countries that lack the rule of law don’t inspire confidence in the minds of foreign investors. Even within Jordan investors make decisions on whether to expand domestically or expatriate aboard based on the state of the Kingdom’s judicial and legislative structure.

Jordan actually ranks fairly high in the MENA region across most of the international indicators related to rule of law or anti-corruption and transparency. In addition, the UNDP’s Arab Knowledge Index places Jordan in the top five countries in the region when it comes to measuring institutional empowerment of the economy.

However, I believe the King’s sixth discussion paper was particularly timely given domestic and regional economic and political events. In a recent survey conducted as part of a wider UNDP study of attitudes across six of Jordan’s governorates, most respondents expressed their frustration over the lack or weak implementation of laws, as well as a deep lack of accountability and transparency within the government apparatus. Hence the situation on the ground is much different from what the figures suggest. This is probably why the King himself felt there was a pressing need to discuss the issue.

Sustainable development is a function of both economic resources and rule of law, both of which are the main determinant of the competitiveness of any economy. FDI will not move to any country in the world without both good economic resources and a transparent judicial system where laws and regulations are fairly and promptly applied.

The government and civil society organizations should seize the opportunity by using the sixth discussion paper as a base to revitalize our economy by insisting on the rule of law in each aspect of our economic life. This should start immediately by brain storming the required code of conducts for both our labor market and business environment. Work and business ethics also need a substantial review. Relevant government bodies, including the ministries of labor and industry and trade, should lead this drive that should also involve all other related stakeholders in order to come to a common understanding on what’s genuinely needed to attract foreign investment to this country.