The indispensable role of the rule of law in fostering prosperity

Amman green arrow increasing
(File photo: Jordan News)
Amman green arrow increasing

Hamza Alakaleek

Hamza Alakaleek has graduate degrees in International Political Economy and International Business Law from Yarmouk University and University de Montreal with focus in Internet of Things, Artificial Intelligence and Data Protection.

The rule of law plays a crucial function in a country's prosperity. It promotes economic growth, attracts foreign investment, ensures social stability, and fosters good governance. A robust legal framework and an independent judiciary contribute to sustainable development and overall prosperity which emphasize that nurturing the rule of law should be a top priority for government. اضافة اعلان

The motive for writing this article is and article I recently read which reminded me of the following anecdote; a few years ago, a relatively large international company wanted to invest in Jordan. Therefore, it conducted its own feasibility studies. Among these studies is the inquiry from one of the four major consulting firms in the world about whether one of the entities in Jordan is applying the rule of law or if it ruled by law, and the answer was that it ruled by law, not through the rule of law.

The rule of law is a fundamental pillar upon which prosperous societies are built. It encompasses principles such as equality before the law, legal certainty, accountability, transparency, and access to justice. Countries that prioritize and uphold these principles experience enhanced economic growth, social cohesion, and political stability.

A strong rule of law fosters economic growth by providing a stable environment for businesses to thrive. It ensures property rights protection, contract enforcement, and fair competition. Investors are more likely to invest in countries with reliable legal systems that safeguard their interests. Case studies from countries like Singapore and South Korea demonstrate how adherence to the rule of law has propelled their economic success.

When individuals and businesses have confidence in the legal system, they are more likely to invest their resources in productive activities. For example, imagine a potential entrepreneur who wants to start a new business but is unsure about the protection of their property rights or the enforcement of contracts. In a country with a weak rule of law, this entrepreneur may hesitate to invest their time, money, and effort into the venture due to the risk of arbitrary government actions or lack of legal recourse in case of disputes.

However, in a country with a strong rule of law, where property rights are protected and contracts are enforced fairly and efficiently, this entrepreneur would feel more confident about investing in their business idea. This increased investment leads to job creation, innovation, and economic growth.

Foreign Direct Investment (FDI) plays a crucial role in fostering economic growth by bringing in capital, technology, skills, and market access. Countries with well-functioning legal systems attract higher levels of FDI due to increased investor confidence. Investors seek stability and predictability in legal systems to protect their investments from arbitrary actions or expropriation by governments. This confidence leads to increased job opportunities for locals, technology transfer, infrastructure development, and overall economic growth. Furthermore, a transparent regulatory environment is essential for attracting FDI while safeguarding public interests. Regulations should strike a balance between protecting investors' rights and promoting sustainable development. Transparent and efficient administrative procedures, streamlined licensing processes, and reduced bureaucratic hurdles enhance the ease of doing business and attracting foreign investors.

Innovation is a key driver of economic growth as it leads to technological advancements and productivity gains. A strong rule of law fosters innovation by protecting intellectual property rights (IPR). Investors and creators are more likely to invest time and resources into research and development when they know their intellectual property will be protected. For instance, when a pharmaceutical company investing millions of dollars in developing a new life-saving drug, without a strong rule of law, there would be a higher risk of patent infringement or unauthorized copying, discouraging such investments. However, in a country with robust IPR protection enforced by the rule of law, the pharmaceutical company can confidently invest in research and development, knowing that their intellectual property will be safeguarded. This encourages innovation, attracts more investment in research-intensive industries, and ultimately contributes to economic growth.

A robust legal framework provides certainty and predictability for investors by establishing clear rules and regulations governing business operations. It ensures protection of property rights, contract enforcement, intellectual property rights, and fair competition. Investors seek legal systems that are transparent, consistent, non-discriminatory, and aligned with international standards.

Moreover, Investors need assurance that their investments will be protected against potential disputes or conflicts arising from various sources such as contractual breaches or regulatory changes. Effective dispute resolution mechanisms such as independent courts or arbitration tribunals provide investors with confidence that their grievances will be addressed impartially and efficiently.

The rule of law contributes significantly to social stability by ensuring equal treatment under the law for all citizens regardless of their socioeconomic status or background. It promotes social justice, reduces corruption, and curtails crime rates. The rule of law acts as a check on arbitrary exercise of power and promotes good governance. It establishes clear guidelines for government actions, prevents abuse of authority, and ensures accountability. Countries like Botswana and Mauritius have successfully utilized the rule of law to combat corruption and promote transparency in public administration.

While the importance of the rule of law is widely acknowledged, challenges persist in its implementation. Therefore, despite recognizing the importance of well-functioning legal systems, many developing countries face challenges in establishing effective legal frameworks due to limited resources, corruption, or political instability.

In conclusion, the rule of law is an indispensable prerequisite for a prosperous society. Its positive impact on economic growth, foreign investment attraction, social stability, and good governance cannot be overstated. Governments must prioritize the establishment and maintenance of robust legal frameworks that uphold the principles of the rule of law to ensure sustainable development and prosperity for their nations. A strong rule of law provides the necessary foundation for economic growth by promoting investment and entrepreneurship, attracting foreign direct investment, and encouraging innovation through intellectual property rights protection. Countries that prioritize the rule of law create an environment where individuals and businesses can thrive, leading to sustainable economic development. When a country has an independent judiciary that upholds the rule of law, foreign investors feel secure knowing that their investments will be protected against unfair treatment or illegal seizure.


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