Political Economy of Economic & Institutional Reform

Keywords

investment law, customs regulation, EU partnership agreement, Export promotion laws, special zones law, Parliament, business association, NGOs, participation

Countries

Arab Region (Egypt, Morocco, Jordan)

Summary

• Understand how institutional and economic reform take place as political processes.
• Assess & benchmark inclusion, i.e. the complementary role of private participation in institutional & economic reform.

Defining Concepts
Governance is a notion that contains the guiding principles of and organizational design for accountability and transparency. We apply this notion to the dynamic process of economic development.
Economic development in this project is defined in the narrow sense of the process of reforming the regulatory environment of trade and investment.
Inclusion as an anchor for governance and economic development (as described above). We take inclusion to mean the interface of policy makers with business communities and societal interest groups in the formulation of laws & regulations. Inclusion also encompasses their participation in the monitoring of government implementation of laws and regulations. We apply this to laws and regulations affecting trade openness and investment promotion.

Research Activities
Stakeholder Participation in design of laws and regulations
Various countries are confronting a colossal challenge to integrate into the world economy (increase tratde, exports and investment attraction). The challenge is practically two-fold: to reform the institutions that would enhance market integration and to re-design the administrative apparatus that could support such reform. We shall use the notion of “institutional reform” in short to refer to this twofold challenge.
There is agreement in the development literature that for the process of institutional reform to be sustainable, it has to become more inclusive given the definition of inclusion mentioned above. The objective of this research project is to understand the process of inclusion in institutional reform in a selected number of Arab countries. We focus solely on institutional reform (laws and regulations) for trade and investment liberalization. We investigate whether decision makers consider the market impact of laws and regulations and how they filter-in the positions of private stakeholders regarding expected (desired) reform.
Inclusion of private stakeholders is a complex process that can degenerate into individual lobbying or it can be a short-lived adventure if policy makers are not capable of absorbing various, often conflictive, positions by different stakeholders. For that reason, we strive to develop indicators to asses the capabilities of the different actors to participate in the complex and highly technical issues of legal reform for trade and investment liberalization.
Because inclusion is also directly affected by the political environment in which it takes place, our project assesses the incentive structure of both policy makers and societal actors to make inclusion a reality.
The actors we look at include business associations, labor unions, NGO organizations, the media reporting on economic affairs, parliaments, and ministerial units drafting laws and regulations.
Project runs from 2002 – 2004.
Political Economy of Trade
Trade reform is a political process besides being an economically technical one. Trade reform re-distributes costs and benefits among major interest groups, especially in countries where trade of agricultural and manufactured goods had seen for many years state central planning, protectionism, often also state ownership. Importers and exporters as well as civil servants in trade related agencies (e.g. customs, standard and quality control, export promotion) are among the major groups affected. Of course worker associations in the affected enterprises as well as consumer protection associations are also critical in this regard. Various ministers, especially those of trade, economics, and finance, are critical actors with– often conflictive- corporate agendas.
We research how far trade reform re-arranges the political landscape as opposed to neutralizing it as well as how far the political nature of trade reform affects effective implementation. This project uses a selection of Arab countries who signed trade agreements with the EU as an example.
Project in planning phase.

Network Activities
Regional launching workshop on stakeholders’ participation, Cairo, June 2002. More regional workshops will follow.
Networking with the Economic Research Forum in Cairo, The Center for Economic and Financial Studies at Cairo University, and the Canadian IDRC Cairo office on the political economy of trade in the Arab region.

Methodology

Research depends on institutional and stakeholder mapping using an extensive number of structured and semi-structured interviews, as well as focus group meetings with members of parliaments, political parties, interest groups and journalists im Morocco, Egypt and Jordan. Interviews were also held with former advisors of economic ministers and former members of technical offices in various economic ministries the three countries.

Main Funding Partners

• ZEF
• German Federal Ministry for Economic Cooperation and Development (BMZ)

Further information

Regional launching workshop on stakeholders’ participation, Cairo, June 2002.

National Workshop on Economic Reform and Governance in Morocco on November 23, 2004 in Rabat, Morocco. The workshop was jointly organized with El-Akhawayn University in Ifran, Morocco.

Regional Workshop on Economic Law-making and Governance during the Annual Conference of the Economic Research Forum (ERF) on December 13, 2004 in Beirut, Lebanon.

Regional Workshop on Economic Law-making and Governance at the Faculty of Economic and Political Science, Cairo University on January 11, 2005 in Cairo, Egypt. The workshop was jointly organized with the Parliamentary Studies Program of Cairo University.

Publications

Noha el-Mikawy & Heba Handousa, eds. (2002) Institutional Reform and Economic Development in Egypt. Cairo: American University in Cairo Press.

Noha El-Mikawy & Marsha Posusney (2002) "Labor Representation in the Age of Globalization: Trends & Issues in Non-Oil-Based Arab Economies" In Employment Creation and Social Protection in the Middle East and North Africa. H. Handoussa & Z. Tzannatos, eds. Cairo: AUC Press.

Noha El-Mikawy (2001) Institutional Reform and Economic Development in Egypt. Discussion Paper, # 30, Bonn: ZEF.

Noha El-Mikawy (2000) "Perceptions of the Social Role of the State in Egypt" In: Discourses in Contemporary Egypt: Politics and Social Issues. E. Hill, ed. Cairo: Cairo Papers in Social Sciences, vol. 22, # 4.

Duration of the Project

until December 2004

Team

• Noha El-Mikawy (ZEF Fellow, Head of Project)
• Heba Handousa (Director, ERF, Cairo, Egypt)
• Ali El-Sawi (Professor of Political Science at Cairo University, Egypt)
• Mouna Cherkaoui (Professor of Economics, Mohammed V University, Morroco)
• Lahcen Achy (INSEA - National Institute of Statistics and Applied Economics, Morocco)
• Dris Ben Ali (Professor of Sociology, Mohamed V University, Morocco)
• Zakariae Aboueddahab (Researcher, Mohamed V University, Morocco)
• Taher Kanaan (General Director, Jordan Center for Public Policy Research and Dialogue)
• Marwan Kardoosh (Director of Research, Jordan Center for Public Policy Research and Dialogue)
• Ibrahim Saif (Center for Strategic Studies, University of Jordan)