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Arabia cannot woo international investors until everyone plays by the same rules

Omar Al-Ubaydli

Published: Updated:

Theranos founder Elizabeth Holmes’ conviction of fraud is the latest example of a powerful individual being held accountable for greed-induced crimes. It is an illustration of the rule of law functioning correctly.

Arabs indulging in schadenfreude should ask themselves why they can’t think of similar cases arising within their shores.
Holmes’ criminal conviction was because she intentionally misled investors to pursue fame and fortune. Her case stoked moral outrage because the fraud was committed in the health field, with the advertised product giving people false hope for medical services.

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With the COVID-19 pandemic lurking in the background, and most households still grieving over lost family members, Holmes picked a lousy time to be embroiled in a healthcare scandal.

She follows in the footsteps of numerous corporate giants caught following dollar signs whatever the price paid by ordinary people. Volkswagen lied about its emissions standards; British Petroleum’s negligence led to a catastrophic oil spill, and Enron deceived investors by illegally concealing its debt. Fortunately, though many stomachs turn when describing these scandals, they brought some measure of justice to the perpetrators despite their riches and political influence.

The fact that the same laws apply to everyone – rich and poor, powerful and weak – is the essence of the rule of law, and Holmes’ case and that of her high-profile predecessors are confirmation that countries like the US still have a good quality of the rule of law. The same cannot be said of parts of the Arab world.

When was the last time you heard about a Middle Eastern plutocrat endangering public safety and being held accountable?

Admittedly, our region is nowhere near as innovative as Silicon Valley, and so we rarely produce something novel enough that it might pose an unknown health risk to the public.

The Quran is highly explicit about everyone being subject to the same rules regardless of their social station and will judge even prophets on judgment day, writes Omar Al-Ubaydli. (Stock photo)
The Quran is highly explicit about everyone being subject to the same rules regardless of their social station and will judge even prophets on judgment day, writes Omar Al-Ubaydli. (Stock photo)

However, the numerous big companies that pepper the Middle Eastern economy have ample opportunity to defraud investors, harm the environment, and deceive consumers. I can think of no high-profile examples of one being caught and brought to justice. Moreover, I don’t think it’s because our oligarchs are perfectly innocent, either.

Religion was active in the emergence of the rule of law. When people start to believe in deities whom they must obey and worship, a set of statutes arise that apply equally to all of society’s strata. Those humans at the top of the pyramid can no longer do as they please with impunity. In Europe, the independent Roman Catholic Church inadvertently played a central role in raising the quality of governance by providing a means for aristocrats to be held accountable.

In the case of Islam, the Quran is highly explicit about everyone being subject to the same rules regardless of their social station and Allah will judge even prophets on judgment day. Moreover, this concept of the rule of law was affirmed by the first Caliph, Abu Bakr al-Siddiq, during his inaugural address: “If I do the right thing, then help me. If I do wrong, then correct me.”

Accordingly, much as seculars like to look down at people of faith, the reality is that religion – when applied correctly – should be a force toward accountability and the rule of law. Unfortunately, in the Middle East, high-ranking religious officials are sometimes at the heart of corruption rackets that evade punishment due to their power and influence, indicating that religion is often misapplied.

Setting aside the moral aspects, holding companies like Bernard Madoff Investment Securities and Barings Bank accountable is good for the economy, too. When foreign investors consider where to put their money, one of the critical variables of interest is the strength of the rule of law, as they want to be confident that predatory local oligarchs won’t expropriate them.

Thus, when the US legal system convicts people like Holmes, though the public’s initial reaction is horror, that should give way to relief and confidence as it shows that the system is working correctly.

In contrast, the weakness of foreign direct investment flows toward many Arab countries is directly caused by the deficiency of the rule of law, and they will continue to struggle to woo international investors until everyone starts to play by the same rules.

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