The impact of favouritism on the business climate

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Abstract: "Wide-ranging agreement exists today that a good business climate is central to economic growth and poverty alleviation. But questions remain open about the role of the state in creating a good business climate. This study is intended to answer some of these questions. The Arab Human Development Report 2004 stresses that sustainable economic growth cannot be achieved in the MENA countries without improved governance. One of the core dimensions of good governance is transparency and the control of corruption. The latter in particular is important for a good business climate (World Bank 2005f). Corruption can take different forms, one of them being favouritism which is very widespread in the MENA region. It is usually referred to there as 'wasta', which is Arabic for 'relation' or 'connection', and describes the use of personal relations for preferential treatment. The present study focuses on the economic effects of wasta. It has a twofold aim: first to find out how the use of wasta