Challenges Posed by Bureaucracy in MENA Region - Case Study Example

Challenges posed by Bureaucracy in MENA region Bureaucracy in the MENA region has been blamed of stifling both economic and political development because of its need for self-preservation. In this region, bureaucracies with differing functions are quite large and these have been developed with the intention of leaders, most of which are autocracies, to preserve the status quo. These institutions have had a long history in MENA, dating back from after the Second World War when most of the current states were formed or officially recognized by the international community. Bureaucracies, despite being an important aspect of governance in the MENA region, have brought about many challenges for society and economies in countries within this area. Bureaucracy has been blamed for the stifling of entrepreneurship in MENA and this has been mainly because it has prevented youth who are unemployed from starting businesses. Almost all aspects of life in the MENA region are under the control of national governments, which have created bureaucracies to maintain this control. With a 60% youth unemployment rate, MENA faces massive problems in future despite the aim of constituent states to ensure that they create as many as 10 million jobs every ten years (Gardner, 2003). There have been calls for rapid reforms in the bureaucratic systems in MENA countries to ensure that the issue of youth employment is tackled swiftly but this has not been done because governments have come to rely heavily on them in order to retain their power. Concern over youth unemployment in MENA has brought about proposals by regional governments for there to be encouragement of entrepreneurship. However, despite these proposals, these governments have not taken any action over the years to develop structures, which will make sure that innovative practices in business are encouraged among unemployed youth. This has been because of an attitude that is widespread among MENA governments that entrepreneurship is a problem that can be dealt with by the private sector and that they do not have any business attempting to solve it (Yousef, 2004). Such an attitude among these governments has done nothing to help the situation because it has not only created a situation where an ever-increasing number of youth are unemployed, but it has further entrenched an attitude of discouraging innovation within MENA bureaucracy. The fact that MENA governments use the private sector as scape-goats when it comes to issues of unemployment has created a challenge where they do not take responsibility to alleviate the problem of unemployment in the region. For many individuals in MENA, any attempt to develop and grow their businesses is more often than not thwarted by massive barriers and hurdles that have been set up by governments. The countries in this region, specifically the Gulf States, are known for charging exorbitant fees for those entrepreneurs who are starting their businesses and this creates a situation where businesses do not have a chance to rise and make a profit (Chaudhry, 2011). The bureaucracies that have been established to regulate the economies of these countries have created barriers through the imposition of high fees to discourage foreign entities from competing unfairly with local corporations. They have unknowingly also made it difficult for local entrepreneurs to enter business because for many of these individuals, who tend to be young, the fees charged are too high for them to pay. This results in their choosing let to go of their dreams even though their business ideas might have a high potential of becoming successes. The fees for registering businesses among the Gulf States is so high that it ranges from between $5000 and $15000 in order for individuals to pay government fees, acquire visas, as well as pay in the deposits required in order to start their businesses (Slimane & Tahar, 2010). These are fees which many would be entrepreneurs in these countries cannot afford and this has made it difficult for them to start businesses. Bureaucratic practices in MENA have essentially worked towards killing the spirit of entrepreneurship and this is because the high fees they have put in place can hardly be afforded considering that young entrepreneurs cannot even come up with the required licensing fees. The bureaucratic system among the Gulf States has made it difficult for individuals to expand their businesses once they start them. The natural course of a successful business is to expand into other areas where there are potential markets. However, this is not often the case for new businesses within the Gulf States because governments have set up a system where a company does not pay fees as a whole but according to how many branches it has (Pack, 2008). This can be quite frustrating for businesses, which wish to expand because when they want to open a new branch, they have to undergo the same process as opening a new business. In these countries, taxation is also based on branches rather than on the company as a whole and this situation makes expansion, especially for start-ups or businesses with less capital, quite difficult (Creane and Sab, 2003). In circumstances such as these, businesses have a hard time creating a balance between making a profit and paying fees that are required by the government. Because Gulf governments have come to require an annual fee for each branch that a business owns, entrepreneurs have in certain circumstances found themselves not being able to make a profit (Bennett, 2003). These fees, because of the bureaucratic nature of these governments, are not flexible since they do not consider whether a business is making a profit or not. Therefore, whether a business makes a profit or not is never put into consideration because the fees that a business has to pay per branch is set. Bureaucracy throughout the MENA region has over the years come to pose a challenge on its system of education. Most of the countries in this region spend more money compared to others of comparable income in education. However, the highly bureaucratic nature of their educational systems has bred a characteristic among them where there is more emphasis on quantity rather than quality to such an extent that they concentrate on how many individuals are receiving an education rather than what they are able to learn (Klasen, 2002). MENA countries have a low quality of teachers as well as being relatively backward when it comes to investment in much needed educational technology. Furthermore, these countries have developed a bias within the education system where more investment is put on higher education rather than on primary education, which have a majority of students. This situation is further not helped when one considers that the system of education tends to be run by inflated administrative bureaucracies who because of their size create confused policies that lead to a lack of efficiency (Salehi-isfahani, 2012). The lack of efficiency in MENA education has created a situation where there are high dropout and repetition rates, which show that the quality of education is slowly but surely going down. Moreover, there has developed a tendency in the MENA region for the education system to produce graduates with skills, which are no longer in demand in the modern competitive world, hence expanding the number of unemployed individuals (Fischer, 2003). Therefore, despite the relatively high economic growth rates of some countries in the region, it has not been matched by growth in human capital as reflected by its relatively low quality of education. While every country in the MENA region has to be analysed individually due to their varying political systems as well as their different rates of economic growth, it is essential to note that all of these countries require some serious structural reforms in their bureaucracies (Sala-i-Martin and Artadi, 2002). However, none of the governments in the region has over the decades been willing to ensure that these reforms are implemented, and this has led to circumstances where states have a massive stake in the economy, essentially stifling growth. Most regimes in the region have found it necessary to have a stake in the economy as a means of ensuring that they are able to retain the loyalty of their citizens through the distribution of political offices as well as bureaucratic positions in state owned corporations (Lust, 2009). Therefore, structural reforms have been difficult to implement and some governments have chosen to abandon them because they do not want to face the risk of resistance from the numerous groups which have developed an interest in the current bureaucratic system. It has been estimated that within a few years, these countries will not be able to withstand the massive bureaucracies at the same level that they are sustaining them now because they are ever growing and future budgets might not be enough to support them (Thiollet, 2011). An example of such massive bureaucracies in the MENA region is that of Egypt where almost a quarter of its annual budget is pumped into subsidies for its middle class as well as the poor and this might lead to a popular backlash if the government were to cut these benefits (Makdisi, Fattah and Limam, 2003; El-Said & Harrigan, 2014). Therefore, while the maintenance of massive bureaucracies has been used by MENA regimes over the years as a means of buying political support as well as appeasing their people, they have a potential of creating budgetary problems for these states and failure to sustain them might lead to chaos as the masses rise against their governments. There have been calls for reforming the bureaucracy in MENA countries especially from bodies such as the International Monetary Fund (IMF) because it was foreseen that these countries would have problems sustaining them in coming years. Despite this being the case, many MENA countries, with few exceptions, chose to retain the system as it was mainly because they did not want to risk their survival as a result of a backlash (Jbili and Kramarenko, 2003). The most recent attempts to reform a bureaucracy in the MENA region were made by Mohamed Morsi in Egypt after he became its first elected president. He came to power with a promise of ensuring that he would introduce structural changes to Egypt’s bureaucracy that would eventually lead to more accountability. He, however, found it quite difficult to institute the reforms that he had envisioned because of massive resistance from the gigantic bureaucracy that he inherited from his predecessor. Despite his attempts to bring about reforms of the security, judicial, and political structures of the country, he came to face plenty of opposition from the established bureaucracies, which counted on these structures for their survival. It is as a result of massive resistance from the deeply entrenched bureaucracy, by the time of his ouster by the military; Morsi had not made any significant changes to Egypt’s bureaucracy and had instead come to make concessions to them as a means of securing himself. Morsi’s reform efforts are an example of how the bureaucracies and people in many MENA countries would react were they to be faced with the prospects of reform. Despite the hostile reception given to bureaucratic reforms, they are essential in ensuring that the countries in this region are able to sustain themselves over a long period because without them, these countries would more likely than not fall into bankruptcy. While some MENA countries such as the United Arab Emirates have over the years attempted to court foreign investors in a bid to strengthen their petroleum sectors while at the same time diversify their economies, their bureaucracies have often been a hindrance for potential investors (Easterly and Levine, 2001). This is because the systems of settling disputes are normally not reliable and in the case where a foreign company needs to get justices, it has to go through many bureaucratic hurdles in order to achieve it. The lack of proper dispute resolution mechanisms in these countries as a result of long established bureaucracies has made investors to lose trust in them and have instead chosen to take their investment to other countries where they are better able to conduct their business. Some countries outside MENA such as Singapore and Malaysia have achieved success in attracting foreign investment through lifting of those bureaucratic measures, which might hinder the flow of investment (Hall and Jones, 1999). This is something that MENA countries have failed to do since many of them depend almost exclusively on their bureaucracies in order to ensure their survival. The fear of shaking up the status quo by restructuring their bureaucracies has created a situation where these countries cannot be able to sustain their long-term growth because only a few foreign entities are capable enough of investing in them. It has been recognized that foreign investment in the modern world is among the most critical elements that determine economic growth and this has been stifled in the MENA region because of the bureaucratic nature of government, which works towards implementing its policies without considering the negative effects of what is being implemented. In conclusion, the MENA region needs to develop a system of reforms that ensure that less bureaucracy and better planning because this is the only way through which it can be able to sustain itself constructively. The lesser bureaucratic hurdles there are, the more likely that young unemployed individuals will have an opportunity to put in place their entrepreneurial skills in such a manner that they are able to sustain themselves rather than relying on government welfare. It is also essential for countries in this region to develop systems, which are designed to provide accurate information concerning unemployment rates, the level of education of unemployed individuals and the market demand for their skills. With this information, unemployed individuals can be helped in getting employment in different sectors of the economy. 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