In past few decades globalization has made a huge impact on all the economies. Developed, developing and Third world nations have realized that no country can be self-sufficient in all the aspects which are necessary for an economy to bloom. Some country may be rich in resources and some may have better skilled workforce. In such globalized era one of the important things for any country will be to make sure that it has a stable environment where other countries can feel secured to invest their resources. For a country to have a stable environment it is very important that it has a very strong formal institution where the laws, regulations and rules govern the stability of the country. (Kumssa & Mbeche, 2004) have described how many African countries have hampered their economic progress because they don’t have formal institution and how important it is that they realize the importance of having institutions which have strict laws, regulation and rules if they want to survive in this globalizing world.
The major problem with most of the African countries is that they are operated by certain ethnic groups who waste their energy on areas which don’t encourage economic growth, instead these activities deplete their natural resources which otherwise could have been used for productive purposes. For example, countries like Ethiopia, Angola, Rwanda and many other neighboring countries waste majority of their resources on violent border activities which don’t help them in anyway(Kumssa & Mbeche, 2004). Kumssa & Mbeche (2004) point out the declining development curve of African countries by benchmarking the development of most of the East Asian countries. They state that both of them had the same income per capita in 1960s, however by mid-1990s the per capita inc ...