Rentire States Examples

Rentire states are wealthy mostly, however its not developing nor producing to help in self sufficient, which created a problem needed to be solved, two suggested solutions are taxation with some benefits resulted from a previous study between high tax countries and low tax countries the other solution is diversification and its effect on economy and socially and two supportive examples

Introduction Rentire states is the country that receives its revenues mostly if not all from outside worlds (rent) on regular basis. Most of the sources of rent paid by those other countries comes from natural resources like oil and as Beblawi defines a rentier state as one in which rents are paid by foreign actors and are amassed by the state with limited involvement of the population, some examples are, Saudi Arabia, kuwait, Gabon, Netherlands and others. Rent economy must contains four element to be called rentire states which are: firstgustis the rent element, second is the rent must come from an outsider country, third, little parties contributes in generating this rent and fourth and the majority consume it. Forth, the government who is responsible for receiving the rent in the economy (suberbant, 2007) The problem:

•The rentire states generates their revenue from outside resource • Which eliminate domestic economy (yates, 1996)

•Which turn the country into an expenditure one instead of production •Then the country will not become self sufficient, its resources will not be used suffetionatily which will make it an expenditure and dependent country •The mentality will change into a rentire mentality because of the lost incentive to produce or learn as people became dependent on the government and the income from the rent. •The government goal in the rentire state is to spend from the rent system without the need of taxation system for its income which make people less involved in the decision making

•Mahdavy said: “Perhaps one of the more crucial problems that need to be studied is to explain why the oil exporting countries, in spite of the extraordinary resources that are available to them, have not been among the fastest growing countries in the world.” (Yates, 1996.) And that makes people dependent and less productive

Therefore the rentire state faces two problems (economic + mentality) and suggested solutions must cover the two areas, which are:

1.Diversifications: Economically diversification has many effects on the country growth and development therefore a more income from different resources and less dependent: •It is possible for the rentir states to be diversified as the many rich in oil countries showed that for example, Norway and the progress being made in Dubai which in developing and finding another sources of income and revenue not only depending on the oil revenues like many GCC countries but still needs more development in its external market. Moreover, less concentration would lead to less sensitive economy especially in the case of GCC if any oil-shock events would effect it less, which reduces volatility and risk and improve the performance of the activities (Shediac, 2008)

•A good example of the diversification, the GCC area economic agreement which was on 1981, which helped a lot in the protection of the national products by the decided points of the agreement and encourages the exchanges of the products maid in each country of the region which as a result encourages each country to produce more nationally using its resources putting into consideration that the market is already waiting for their products and the foreign competitors are not allowed in many fields as it is one of the goals of the agreement and the integration of the production activities in the GCC members and the contribution of activities each specialized in a particular area which will help in the complementation of the whole agreement members (GCC ,Legal )

•Another example of the diversification would be the support of the government or the other sectors of the country to the youth investors to start their own business by financing their ideas and introduce it to the market, such as the industrial bank of kuwait, as ahmad al hadhood a manager there said “The entire cost of those projects stands at KD 10.398 million, out of which the bank's stake is KD 7.076 million," project types are chemical, food, mechanical, construction industry, services, textile, printing kind of projects and papers . The bank also has categories regarding the projects:

•"Small projects” KD 0.5 million in total assets. • Uni graduates KD 100,000 - KD 3, 000 minimum. •The bank support the projects with 80% of new project (Kuna, 2006)

2.Taxation: Tax paying would give people more sense of responsibility and an incentive to work and produce A study was done low tax countries with high tax countries, which will help us in the case of retire states comparing them to the lower taxes countries, as it will be worse of course. In the study the used some indicators to represent the social and some the economic which is similar to our case (the mentality and economy):

Socially:

•High tax countries have lower poverty percentage than high tax ones •Income is distributed more equally in high taxes countries than lower ones •The workers have more economic security n high taxes than lower taxes countries •In education the high tax countries scored a higher percentages of people completed secondary school and universities •More trust among people and toward the institutions in the higher taxes countries Economically in the higher tax paying countries it was recorded that they: •Higher GDP per capita and hour worked and spend on research and development •Lower rate of inflation and labor cost

•Higher budget and account surplus •High rate of national saving and peoples saving •Lower national debt •Higher rank in the growth competitiveness (Neil, 2006) So as a result of the above benefits mentioned above resulted from taxation for the high tax paying countries comparing to the low one, which we can apply on the non-tax countries and rentire stats, which will almost have similar effects in my opinion to the countries development. Conclusion

Rentire states have some benefits for the country as a wealth source however it had its own problem starting the economic effect and the mentality resulted from the economy conditions. As solutions I suggested diversification and taxation with examples of each.

References •Douglas A. Yates: “The Rentier State in Africa.” Africa World Press, Trenton, NJ, 1996. •Shediac R, 2008, ECONOMIC DIVERSIFICATION the rosd to sustainable development,Booz and company Abu Dhabi •GCC legal information .uni economic agreement in GCC .[ online] available at :< http://www.gcc-legal.org/mojportalpublic/TreatyDetails.aspx?id=541> .[accesed at 9 march2012) •Kauna, 2006.Kuwait industrial bank sponsors. [Online] available at < http://www.kuna.net.kw/ArticleDetails.aspx?id=1668778&language=en> (accessed at 9 march 2012) •Suburban emergency management project, 2007.what is a retire state. [Online] available at < http://www.semp.us/publications/biot_reader.php?BiotID=227> accessed on 8 march 2012)