Nicholas Thompson in Legal Affairs (via Arts and Letters Daily):
MALAYSIA AND INDONESIA COULDN’T BE CALLED TWINS, but they might be called siblings. The adjacent Southeast Asian nations possess similar natural resources and their citizens speak similar languages and follow similar strains of Islam. But Malaysia’s economy is prospering while Indonesia’s is floundering. Malaysia’s stock market is far more vibrant than its neighbor’s, and its average resident is three times richer.
Economists might explain these divergent paths by pointing to the countries’ different responses to the Asian financial crisis of the mid-1990s. Sociologists might find a cultural explanation in the close-knit community of Chinese immigrants who are the most powerful force in Malaysia’s business community. Historians might point out that Malaysia’s struggle for independence was much less bloody than Indonesia’s.
Another explanation lies in the countries’ legal systems, however. Malaysia was a British colony and its legal system is based on the common law: the set of rules, norms, and procedures that has guided the legal system of England and the British Empire for about nine centuries. Indonesia was a Dutch colony and its legal system derives from French civil law, a set of statutes and principles written under Napoleon in the early 19th century and imposed upon the lands he conquered, including the Netherlands.
According to research published by a group of scholars beginning in 1998, countries that come from a French civil law tradition struggle to create effective financial markets, while countries with a British common law tradition succeed far more frequently.
More here.