Does the Perception of Governance Institutions Matter for Private Investment: The Case of Middle East and North Africa?

The quality of governance in the Middle East and North Africa (MENA) region is generally considered to be inadequate. Although this is true for a large number of institutions, quality of governance is a wide-ranging phenomenon and its distinct features may exhibit quite different paths for the same region (see Table 1). For example in terms of the administrative quality and political stability indicators used in this chapter, MENA ranks third, with scores of 0.14 and 0.07 respectively, among the six developing regions and is superior to Africa (AFR), Latin America (LAC) and South Asia (SAS). This basic comparison shows that contrary to common belief, MENA is not particularly deficient in institutional quality when measured by these indicators. On the other hand political accountability for the MENA region is the lowest among the regions with the score of -0.90. The disaggregated governance variables in our sample of developing countries, which are shown in Table 2, also confirm the same result. The level of the variables associated with administrative quality include corruption, law and order, investment profile and bureaucracy quality; and with political stability include government stability, internal conflict, external conflict and ethnic tensions, look rather satisfactory for the MENA region. The region is ranked as the second best in the categories of bureaucratic quality and investment profile and 'the best' in the categories of government stability and ethnic tensions. In contrast, in terms of political accountability variables, civil liberties and government stability, MENA has the lowest score among all the regions.