Impediments to Dispute Resolution and Firms ’ Competitiveness in the MENA Region *

This paper starts from the premise that private sector development is of crucial importance to the future development of MENA countries. It demonstrates the relative importance of various institutional constraints, in general, and impediments to dispute resolution, in particular, in reducing the competitiveness of private firms in the MENA region through by increasing transaction costs. It describes existing dispute resolutions systems in the MENA region and the impediments that their shortcomings provide to firms’ competitiveness. It identifies the three major alternative means of reducing these impediments to dispute resolution and hence also transaction costs, namely legal reform, judicial reform and “alternative dispute resolution” methods (ADRs). Each of these general approaches can take various forms, each form having certain necessary pre-conditions and advantages and disadvantages. Since MENA countries vary considerably in their existing environmental conditions and social objectives, no single approach is likely to be suitable for all. Moreover, different entrepreneurs within each country and faced with different types of disputes may well prefer different approaches. In general, as important as these reforms are, they are difficult to achieve. Nevertheless, some country experiences with these different kinds of reforms have been relatively successful than others. Hence, while the focus is on MENA countries, advantage is taken of especially relevant experience with various methods of reform in Latin America, Eastern Europe and East Asia. * Paper prepared for the Workshop “What Makes Your Firm Internationally Competitive” organized by the Egyptian Center for Economic Studies (ECES) for the Third Meeting of the Mediterranean Development Forum to be held in Cairo March 5-8, 2000. ** The author is extremely appreciative of comments received from Samiha Fawzy, Ahmed Galal, John Page and other participants at the preliminary meeting in December 1999 as well as useful suggestions from Rick Messick, Lynn Hammergren, Margaret Popkin, and Andrew Stone.