Executive Summary

The acquisition is a form of asset purchase and stocks of a company acquired. The methods employed in these two kinds are different in practices and solely based on shareholders’ positions.It is essential to determine that the growth rate should be for the transformation of the company and its corporate identity. Therefore, the targeted company identifies a new direction and adds some new capabilities.The management approaches define motives to work under mergers and acquisitions. This hypothesis is workable in many instances when a manager seeks to hire companies for their own interest and not for sole economic gain.

The increased competition in all financial sector develops motivation for customers to stay with that particular company.If a commercially viable strategy is not implemented, all the synergies of companies become worthless. In some cases, the cost of delivering a marketing strategy is better for the public. It is worthy to say that public institutions need to bring growth and harmony and manage high-risk assets. This report presents effective understanding of mergers and acquisitions, along with motives for success and failure from real life examples.

Table of Contents


The union of two or more companies that forms an entity or describes a pool of interest is a merger. It is not a consolidation, which is a combination of different companies/product lines or functional areas. The mergers correspond to no new entity, while in some particular cases, an entity is created. An accounting method that is used in merges as a part of the investment is known as purchase acquisition (Bick, Crook, Lynch & Walkup, 2017). The accounting method in which pooling of interest for the merger is combined when without considering the impact of the tax. Mergers and acquisitions are a vital tool to facilitate corporate expansion with the control of assets and shares. It also offers corporate power on the market through joint strategic opportunities.

Capital budgeting analysis is used to ensure the expected return rate, which will undertake specific considerations of financial issues and tax accounting. There is usually a significant hype about the impact of mergers and acquisitions, which is not favorable. They destroy the acquirer’s acquirer’s business value. The process of mergers and acquisitions incorporates the company’s valuation with the price that takes over its assets. This process highlights that price paid is higher than the actual price (Clarasys, 2020). The common failure of mergers and acquisitions is the difficulty of cultural integration. In common practice, the merger is an entity combined with two or more firms. It reflects different leadership styles, corporate cultures, and expectations of employees. The scope of functional differences is broad and based on employee’s expectations.

The corporate law defines a merger as the combination of different corporations and continues to exist when there is asset transfer. The mergers learn shareholders that exchange shares with shares for new firms. The acquisition highlights the target company as an entity that is involved in the business, and its shares are linked to shareholders for debt or cash (GERBAUD & YORK, 2007). The acquisition is based on buying all the assets or a part of the stock. Mergers and acquisitions are the different entities described under various researches. Research indicates that an alliance can be a formation of a holding company.

Corporate managers face increasing pressure to grow company size, mainly when there is a low demand for the product. The process involves managers looking to jump-start growth, and they have to make sure that this growth can provide returns for the shareholders (Ismail, Dbouk&Azouri, 2014). The concept of the merger is different from the acquisition is the sense of resource size. This field has grabbed extensive attention in recent times. Mergers highlight an interdisciplinary framework that enables companies to grow faster and also ensures that how weak companies are acquired. This pace is kicked up from 2001 to 2004 when at a global level, 30,000 acquisitions were completed. It is observed that an increased number of assets is attributable to certain key factors such as deregulation, low inflation, and a rising stock market. Disney and Pixar/Marvel is a successful example of mergers and acquisitions in the resource-based category. The increase in this activity is witnessed in industries like information technology, healthcare, infrastructure, and the development of software.

In South Africa, the Johannesburg Stock Exchange under the control of American corporations involved in market capitalization (Ghosal&Sokol, 2013). In 1984, the political transformation was established due to democracy. Big conglomerates faced unbundling, so their level of the stake was marginalized. Another example was the Emerging Economic Empowerment companies when they participated in the stock market that involved the unbundling of large consortiums. This acquisition by Anglo American Group, like Johnnic investment, led to the emerging business of blacks and companies acquired access to the public capital. This string of emerging acquisitions in previous years illustrates the control of market capitalization despite the widening of economic empowerment. America Online and Time Warner is an example of a merger and acquisition that managed acceptable returns. In some instances, management can experience acceptable returns determined by the size of the company. In some cases, the company has to contribute to the appropriate level of returns, so it selects aggressive growth by involving in mergers and acquisitions.

Part one

Mergers and motivations work on the basis of motivations. These are particularly to increase the financial return and get national interest. The key motives in the expansion of mergers and acquisitions are to create wealth and to expand the market base. Acquisitions are the small role players that can significantly add to the benefits. Proper post-acquisition strategies are not prevalent normally. South Africans large banks acquired smaller banks only to acquire the opportunity of community arrival and reinvestment bill. The bill was managed by the government and help for the smaller banks to get housing finance.

In past South African firms understood the calculated financial risk through understanding the secured liabilities. In case, if some post-acquisition strategies lack focusing on proper management skills or on external environmental factors, the business confronts failures. Some examples from financial sector companies present a high level of competition when there is an increase in customer loyalty and a good brand image (JOHNSON & SIMON, 2009). A bank can face a high threat if no minimum liquidity threshold achieved. Banks focus on risk-free investment and deposits to cover all the extra costs as well as to maintain their capacity level. The research presents that companies have to merge to manage operations and to cut costs efficiently.

Improve Financial Performance

The improvement in financial performance is attributable to the increase in revenue or reduction in costs. Under a synergic strategy, this is accomplished to get operational motivation.

Motivation smoothen profits

The financial improvement process undertakes firm features that explain income smoothing practices. It is based on general motivations that help managers to engage in the financial improvement process. Internal expansion by Hymer has faced by product diversification, vertical integration, and mergers & acquisitions. The motive for a firm’s expansion and profit generation is the pursuit of management (Ogada, Njuguna&Achoki, 2016). This context is well explained under proactive and defensive factors that operate effectively. Under geographic diversification, these factors ensure control due to power and competition in the markets. The market power perspective is defined under proactive factors that appear attractive to the industries. They are rendered more attractive due to the use of anti-competitive conventions such as mergers and acquisitions, barriers to entry, and collusion. Cross-selling success as pros for McKinsey & Company are in the form of efficient delivery of products to realize revenue synergies. Merging firms usually underestimate this potential, but the company has achieved its targeted cross-selling goals (Penrose &Pitelis, 2009).

The cons of cross-selling for the CitiCorp Group are difficulty with challenges related to revenue synergies. They involve multiple groups that are tough to estimate and measure their financial impact. Another con is the gap between end result and goal of targeted selling, i.e., estimated at 20% when measured for 3-5 years synergies.

Increase revenue or market share

The increase in market share of revenue is related to the cost rationalization under operational motivation. The economy of scale also plays a part in managing revenue. Cost rationalization is tax loss, staff, and plant matters. In this framework, market extension and product extension are categorized under horizontal form/ competitors. The market extension links to horizontal form and overseas, so the conglomerate M&A is involved. These mergers occur between two companies that deal with similar products, yet different markets. The market extension merger ensures that companies acquire success in a big market when they work on a large client base. The example of a market extension merger is the acquisition of Eagle Bancshares Inc. by RBC Centura (Renneboog&Vansteenkiste, 2019). The pros of this acquisition were a high growth rate in the North American Market and increased operations as being successful. Some little cons exist for Dow Chemical merger and acquisition in the form of intense competition that they are facing in the financial market. This needs diversification and operations in leading US markets.

The product extension merger occurs in two organizations in similar products and similar markets. This merger allows companies to access larger sets of consumers and group together, so they earn good profits. An example is Mobilink Telecom Inc. and its acquisition by Broadcom under the category of product extension merger. The pros of this type are certification and participation in the competition, as seen in the company’s success. The cons exist for Pfizer and Warner-Lambert for this form due to easily imitated business models and a variety of products in different markets.

Manager’s hubris

An unrealistic belief about managers is managerial hubris that relates to bidding firms when assets are managed for a targeted firm. The conglomerate merger occurs when unrelated business activities located in diverse geographical areas unite and form a company. Its example is Walt Disney’s unification with the American Broadcasting Company. Its successes are pros like value creation, acquisition of assets, and diversification. The cons can be illustrated better for H. J. Heinz and Kraft Foods as tax implementation and financial vulnerability based on circumstances.

Resource acquisition

The mergers and acquisition-related to the human resource are key business tools that show a corporate entity acquires other. This acquisition relates to the professionals when they involve in identifying solutions and recognizing problems in management (WATCH, 2010). The example of resource acquisition is Exxon and Mobile, the success factors in resource acquisition are retentions of employees; good employee benefits program, and development of new policies. The cons are appropriate to discuss for AT&T/Bell South regarding uncertainty in employee performance, low participation, resistance, and high turnover because it can lead to failures.

Vertical integration

The vertical integration as a merger and acquisition illustrates the concept of manufacturing plants and store brands. The functional areas are creation, selling, and distribution of products that eliminate the need for external entities such as transportation and manufacturers. An example of vertical integration is the acquisition of Google of Motorola6 Ikea’s 2015. Its cons are the flow of the supply chain and increased relations with the partners (Renneboog&Vansteenkiste, 2019). The cons for vertical integration can be seen from Facebook and Instagram M&A face downstream on occasions and intense competition in technology.

All of these types discuss that some types of mergers and acquisitions are more likely to get success over others, considering the factors involved.

National interests

The exclusive motivation for mergers and acquisitions is used for national interests. This mainly includes natural resources and strategic resources.

Natural resources

In Africa, the natural resources mergers are made by developed world organizations, such as Europe and North America. Merger action in basic industries, like, petroleum, agriculture, mining, quarrying, hunting, forestry, and fishing, had continued pretty flat during 1988 and 2004, at times when mergers in manufacturing and services had increased and decreased many times by the percentages in hundreds. If something, natural resources mergers bear an inverse relationship with commodities prices.

In different aspects the national interests, these are really difficult to understand. As per researchers, the National interest of Australia is something that can only be described by the Australian people or Government of Australia. It is not stationary and cannot be described mechanically. The law does not offer mechanical guidelines or definitions for the national interest measurement. Due to the significance of natural resources, mergers are oriented on specific principles to get benefits. The accusations of firms under political expediency needs openness. Mergers, as national interests, show greater flexibility (Penrose &Pitelis, 2009).

Due to the large scale of production, products appear in a combined form that must avoid anti-trust issues. It is necessary to increase production to maintain the scale in the industry, so firms invest more in new products, and natural resources such as oil and gas are used to enhance benefits for the economy. In some cases, raw materials are acquired at low cost; for instance, Walmart is the main example that works on corporate expansion and has not faced shrinkage from entering into new markets or reducing prices.

Strategic resources

Strategic resources are the leading format that works on mergers and acquisitions to expand know-how and enter into a competitive environment. The structural scope of the environment is linked to the enhanced mechanism of corporate governance. In the realm of the firm’s acquisition and resources, strategic initiatives play a crucial role. The corporate information security is an integral component to consider while working under acquisitions in the public interest. It helps organizations acquire a key advantage when organizations are facing threats to work. The role of corporate activity undertakes security concepts because it controls the organizational environment. It can be easy to overlook the security matters, but it may enter an insecure connection when the proper framework is installed. The diligence process is linked to the information of an organization where the cybersecurity aspect is recognized as fundamental terms.

The technology under strategic resources is updated with the need of time. Research indicates that 41% of companies focus on mobility and technology to work as a part of their growth strategies. Accenture strategy research states that with the pace of fast-changing communication, high tech industries develop. Established players focus on innovation and stay ahead. In mergers, mostly agile startups are implemented, but they appear complex to handle. The playing field of mergers and acquisitions has opened the door of a new transformation. Due to the implementation of technology, forward-thinking communication offers new paradigms (Ismail, Dbouk&Azouri, 2014). Mergers and acquisitions redefine the boundaries of the industry and generate improved performance.

Global mergers and acquisitions in Japan are experiencing rapid growth due to optimistic nature regarding globalization. The government of Japan has developed policies for mergers and acquisitions that support research activity. At the global level, the scope of transactions in firms remains robust due to prevailed harmony and technology. The activities of mergers and acquisitions in Japan in 2018 is estimated at $358.2 billion. The economic and demographic shifts are to cater to new opportunities. If a portfolio of companies is clarifying their acquisitions, it is likely that they aim for a sharp growth rate. Surge development costs in mergers and acquisitions are attributable to research and development expenses as well as new technologies.

Companies in Japan are focusing on capital market advantages because they are pursuing cross border transactions. In 2008, the financial crisis left these companies in solid shape in financial matters, yet they were characterized by the balance sheet cash (Ghosal&Sokol, 2013). Japan market and central banks faced a rise in interest rates, but they continue to maintain a zero level rate of interest, thus giving corporate operations access to the finance deals.


Several factors are responsible for the success and failure of mergers and acquisitions. The success factors are economies of scale, synergies, cost-saving, and rationalization of channel distribution. It explains different ways that companies adopt to focus on potential capital returns. The common reasons for buying acquisition are also discussed under it.

Strategic plan

The critical factors that impede conditions to influence the outcome of the project are the key terms that are viewed by stakeholders. Researchers view some critical factors as the measurements that are assessed by project success. These issues are project management, project success criteria, and cultural differences. The criteria of project research are fulfilled by budget and quality, according to some authors. These criteria do not necessarily measure project outcomes. To that end, project management is only considered for its operational value, not strategic (Alhenawi& Stilwell, 2017). Project success development is based on internal aspects, while external aspects can be complicated. This measurement is important for success estimation. Researchers also focused on the complex criteria of project management factors that contribute to the success of the project during the handover phase.

Assessing project success is attributable to the stakeholder community benefits, satisfaction, purpose achievement, and organizational benefit (Canback, 2004). In merger and acquisitions, the project management team focus on different perspectives required to get success within the estimated timescale(Warf, 2003). Cultural differences are key factors that may contribute or hinder in project development(Worthington, 2001). The strategic fit can be complimentary when two companies interact with different plans or identify merger strategy (Gupta, Kumar &Upadhyayula, 2012).


Mergers and acquisitions face intuitive target when the acquired firm become more successful(Vestal, 2007). The knowledge of the industry, along with the learning curve, describes the chances of success (Cowin& Moore, 1996). The strategic failure for mergers can be poor strategic rationales, poor integration, difficulty in leading, and communication of the organization. The poor execution and increased costs provide clear evidence of failure and important issues to consider. Slow post-integration of mergers, lack of risk management strategies, and cultural clashes are some key concerns that occur during implementation, for instance, in Altria/Philip Morris(Souply-Pierard and Robert, 2017). The strategic planning policy is important to implement because it is crucial to focus on an effective alignment tool that can follow the due diligence process.

Due diligence is about the assessment of the targets under M&A, where all parties learn how to eradicate misunderstanding(Roengpitya, 2011). The process is critical because of it and comprehensive analysis of the merger, such as their financial stability and cash flow (De Noble, Gustafson &Hergert, 1988). It is found out that the complexity of mergers and acquisitions is increased, i.e., Anheuser-Busch InBev and SABMiller. This endeavor offers an experience to focus on new opportunities. Firms, in this way, face losses and stimulate experience to boost their performance(Peltier, 2004). Firms face success when it learns from past experiences. Some mergers experience consistent purchasing that contributes to the chances of success(Papadakis, 2005). The acquisition experience is not a superior factor, but quick succession allows learning of new experiences for management. The management capabilities of the team effectively implement operational excellence. McKinsey & Company have shown a good implementation of strategy fit to contribute to the merger future.

Timing (Market Cycle)

Mergers and acquisitions are the main sources of organizational growth that achieve diversity, profitability, and growth rate(Friberg, Norback and Persson, 2012). These activities are inclined to attain corporate objectives such as market share and get diversified operations(Greco, 1996). Eagle Bancshares Inc. by RBC Centura, has focused on the market cycle by visualizing the growth pattern and competition. Analysts focus on the successful mergers and acquisitions that their success factors are based on marketing and targeting the right opportunities (Okafor, 2019). For instance, Glaxo/smith Kline is a successful merger and acquisition and has experience in guiding organizations to implement strategic direction. From the marketing perspective, the scope of functioning is based on certain strategies to target the right demographics and to acquire functional planning as well as execution. Due to the structural significance of M& A, the role of the market cycle is to focus on the time frame necessary to implement strategy fit that, in turn, gain advantages(Chibuzor, 2016).

Its role in breaking monopolies and raking control of industries is linked to a marketing perspective that undertakes predatory tendencies of business to seek diversification. This framework is built on the new market entry decisions, establishing market players, and to smooth the cash flows(Boen et al., 2006). Mergers and acquisitions are playing a strong role in increasing the capital flow, leverage buyers, and to create opportunities(Majumdar, Moussawi and Yaylacicegi, 2013). This method is significant for corporate restructuring since it makes companies focus on their operational excellence (Suniram& J, 2019). Asian and European firms seek healthy investment opportunities and time frames through M & A. Timing ensures discipline and productive capacity(Boen, Vanbeselaere and Millet, 2005).


The role of mergers and acquisitions in an industry is significant to enhance opportunities in the market and develop organizational benefits. Better operations and increased production capacity are significant to generate investment opportunities. When Mobilink Telecom Inc. and its acquisition by Broadcom was executed, the plan undertook functional expertise and managerial implications (Okafor, 2019). Mergers and acquisition projects are crucial for companies to grow rapidly and execute their corporate strategies, i.e., Mylan acquisition of Meda (drug maker). This is witnessed in well-developed studies as 50-70% acquisitions increase costs or revenue and can destroy the shareholder value. Some mergers fail and confront challenges to integrate. The example of Exxon and Mobile highlights the involvement of shareholders and the execution of plans by focusing on the client’s success(ABEDIN and DAVIES, 2007). The outdated strategic plan is linked to inadequate execution and planning. In some instances, if executive leadership is not experienced, the mismatch in integration planning occurs.

M&A projects identify significant execution factors that can contribute to success and failures. Planning and execution are key steps for mergers to take over a crucial development stage and maximize their potential for success (Souply-Pierard& Robert, 2017). Researchers have found out that through mergers and acquisitions, capabilities are improved, and a smoother integration is acquired. These success factors for firms are significant to classify in two stages, first is the front end, and the second is integration. Execution, in this way, gives rise to corporate leadership, planning and facilitates stakeholder team through learning mechanisms.


Mergers and acquisitions significantly impact organizations and bring changes in ideology and ownership. Strategic activities and cultural cohesion play a significant role in bringing harmony in the organization. The forward-thinking approach in M&A captures core competencies, organizational skills, and knowledge base. The strategic assets enhance collaborative leadership and talent retention for the organization. Cultural values and traits are important to analyze in different workplaces. The cultural traits are easy to identify due to social group diversity. The depth of cultural influences defines discipline, beliefs, and innovation. Cultural cohesion acts as the strategic asset for M& A that provides the internal weight of the organizational structure. This process develops cultural traits. These processes are linked to maintaining the integrity of the organization, so managers are required to be equipped to meet all organizational needs.

Mergers and acquisitions can be financial or strategic. The former allows expanding finance and bringing in the planning of the financial organization as well as product diversification. The expansion into new facilities defines new horizons and product development perspectives. Through offering credibility to the organization, it appears with the power balance in the market. This report about mergers and acquisitions discussed the extensive scope of their benefits, success, and motives for profit.

The report described key successes and failures of mergers and acquisitions with the appropriate motivations. Companies are engaged in M&A under a broader scope of activities that acquire success possibility. With the discussion of profit-based motives, the acquisitions work on the basis of different objectives. Motivations are illustrated in this paper that provides success criteria for the firms under two main objectives. This aspect is explained in this paper by improvement in financial performance and the maintenance of national interest. This report has examined market revenue, operational motivation, the economy of scale, and rationalization of cost. The diversification, resource acquisition, and vertical integration are discussed under extensive real-life examples. In light of significant evidence, it is discussed that motivation is not only significant to determine the success and failure of M&A. This report has discussed the strategic plan, its implementation, timing & execution under certain dimensions such as vertical/horizontal, relatedness, and APP pricing. The extensive review of different literary studies provided that M&A works more significantly under significant managerial experience with due diligence. The discussion of M&A has also yielded a broader scope of success factors such as strategy, expertise, and diligence. Cost and revenue synergies are focused on M&A strategies to improve functionality. In the realm of advanced technology, successful strategic rationales are considered appropriate to generate good ideas.

The current discussion in this paper has fulfilled the objective of this research, and it is inferred that reducing costs, improving organizational structure, and acquiring expertise for any organization is important to understand. Today, the growth of mergers and acquisitions is also associated with negative consequences. Companies invest a huge amount in acquiring expertise, and understanding of key factors play a stronger role in the success of mergers.


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Trade is one of the oldest forms of business in the human world and has taken place worldwide, not only between neighbouring countries but also across the globe. Many pathways have been specially curated to ease the trade of goods and services between many nations and countries. One of the major routes is the Suez Canal, constructed by the British and the French in 1869. However, the question to assess Trade comes to mind as many environmentalists point out the hazards of Trade and the negative effect it might have on the environment. On the other hand, many also claim that Trade is actually more beneficial for the environment than otherwise. In effect, it can be said that Trade has both negative and positive effects on the environment.

Positive Impact of Trade on the Environment

The relationship between the Trade and the environment is a strong one that goes together hand-in-hand. The environmental impact of “trade liberalization” has been divided into many types, including the scale, technique, and composition affect—the liberation of trade results in the expansion of economic activity and growth.

The Scale Effect

The scale effect suggests that it must be recognized that the balance between maintaining economic welfare and keeping pollution levels low is a hard one to maintain.  In simple words, “if the scale effect dominates technology and composition effects and if externalities are not internalized, economic growth will always be harmful to the environment” (Stoessel).

Trade and national incomes are also very closely linked; as trade increases, national incomes also see a rise. This, in

turn leads to improvement in environmental aspects and quality of the surroundings (Grossman & Krueger, 1993; Copeland and Taylor, 2004).

The complex nature of the number of positives and negatives of Trade reminds us that Trade does not entirely lead to causing harm to the environment (Copeland and Taylor, 2004).

Keeping in mind the nuanced nature of the debate, it is very difficult and perhaps unfair to come up with a conclusively decisive answer.

The Environmental Kuznets Curve (EKC) helps explain the phenomenon that “raising incomes per capita are not linearly correlated with environmental deterioration. Rather, pollution increases in its early development stages until it reaches a turning point, and then declines since concern with environmental quality increases and long-term issues start to prevail” (Stoessel, 2001Copeland, 2005Copland and Gulati, 2006).

The Technique Effect

Many academics and researchers agree that 75% of technological advancements have been due to Trade. This model suggests, “New technology is thought to benefit the environment if pollution per output is reduced. Furthermore, if the scale of the economy and the mix of goods produced are held constant, a reduction in the emission intensity results in a decline in pollution. Hence, the technique effect is thought to have a positive impact on the environment.” (Stoessel, 2001Mathys, 2002).

The Composition Effect

This model propagates that “Trade based on comparative advantage results in countries specializing in the production and trade of those goods that the country is relatively efficient at producing. If comparative advantage lies in lax environmental regulations, developing countries will benefit, and environmental damage might result. If instead, factor endowments (e.g., labor or capital) are the source of comparative advantage, the effects on the environment are not straightforward. Therefore, the impact of the composition effect of Trade on the environment is ambiguous.” (Mathys, 2002Stoessel, 2001).

Economic Growth

Trade with other countries can lead to growth on two levels, one for the trading partners, and the second for the indirect stakeholder countries that will be affected in the long term. Moreover, Trade, by pushing forward economic growth, has the capacity to lead to societal progress. This may be because development will be taken place as a result of an economic boom that will contribute to increasing the environmental capacity for efficiency. Further, the economic boom may also lead to advancement in research and development that will directly impact local and international production operatives and may discourage the use of dangerous substances in the field of production.

Environmental policies

Another positive aspect of trade and commerce is that the process can result in the development of the objective of manufacturing and adopting pragmatic environmental policies and legal standings. This is so because the introduction of a country in international Trade exposes its trading sector to the other country’s trading sector and the involved checks and balances included in the exchange of Trade make the countries involved to better their trading policies and to integrate acceptable environmental policies that may contribute to the positive image building of the country in the international community. Hence the changes introduced in the supply chains and the associated trading sector enhances the importance given to the environment and makes Trade beneficial for it. This is essentially what Rose and Rankel (2005) suggest in their “Gains from Trade” Hypothesis that was a built upon the ideals and teachings of Adam Smith and David Ricardo whereby as per Smith, “the gains from trade arise from the advantages of division of labor and specialization—both at the national and international level.” Also, according to Ricardo, trade contributes “to increase the mass of commodities, and therefore, the sum of enjoyments…”.

Many people who are supportive of trade purport that trade boycotts and restrictions are in actuality, not helping to the improvement of the environment. Many international bodies and communities have recognized this argument and have united to improve Trade in an efficient manner. For instance, the formation of World Trade Organization (WTO) in 1995 has tried to bridge the gulf between these two discrepancies. WTO constantly works to propagate green economy and sustainable development; it has also introduced many policies to protect the environment. It is mentioned on the WTO website that “In the WTO, the Committee on Trade and Environment started its work on environmental reviews in 1996 under Item 2 Environmental protection and the trading system of its work program.

In 2001, the importance of environmental reviews in WTO trade negotiations was confirmed in paragraph 6 of the Doha Declaration. This reads We take note of the efforts by Members to conduct national environmental assessments of trade policies on a voluntary basis.

In Paragraph 33 of the Doha Ministerial Declaration Ministers “encourage that expertise and experience be shared with Members wishing to perform environmental reviews at the national level.” The continued work in the committee is based on this.

The importance of reviews was also confirmed in the Johannesburg World Summit on Sustainable Development’s Plan of Implementation of 2002.”

The Doha Declaration is testament to the fact that WTO is determined to ensure that Trade does not cause environmental destruction but rather propels the development of the environment with the help of Trade.


Negative Impact of Trade on the Environment

However, trading with other nations also posits many potential dangers.

Growth may lead to Pollution

One of the major negatives of Trade may be the resulting pollution due to the excessive degrading of resources used as power to make Trade possible. There is also a direct impact on climate change that results from Trade. The process of trading with countries far away from the home country may lead to intense weather changes and the severe changes in the content of the sea. Maritime transport is particularly harmful in some cases. It accounts for about 80% of the total international Trade and the chance of oil spills increased because of this high number.


Reports from International Tanker Owners Pollution Federation Ltd (ITOPF) suggest that

“between 1970 and 2016 approximately 5.73 million tonnes of oil were lost as a result of tanker incidents As single large incidents can be responsible for a huge share of all the oil spilled in a given year, it is advisable to look at trends or decade averages. Over these 43 years, the annual quantity of oil spilled decreased hugely. In the 21st century the quantity of spilled oil was smaller than in several single years in earlier decades. 2012 saw the lowest oil spillage on record so far: 1000 tonnes were spilled. The development can be seen in the following visualization.

Since reports on small (<7 tonnes) oil spills are less reliable only medium-sized and large oil spills are included in these estimates. These are the oil spills presented in the chart before (above).”

Oil spills have been known to cause extremely harmful environmental problems such as damaging the ecosystems and natural habitat found in beaches, ocean and seas that may affect birds, marine mammals, fish, and many more. Long term impacts of the oil spills are flabbergasting and intense. For instance, the short term impact on the sea turtles includes their difficulty in reaching the seashore, but the long term impact may include their eggs failing to develop properly in the oily field or platform and leading to a substantial decrease in the quality and quantity of the species.

Oil spills may also have deadly consequences for a larger marine community. Oil spills are known to repeatedly kill marine life including dolphins, whales, sea otters and many more. The oil property of blocking breathing regions of sea life is a significant factor in leading to the death of these mammals. Oil can completely or partially disrupt can the blowholes of the larger mammals that might hinder their breathing. Other than that, oil coats on animals can also lead to several harmful internal and external diseases such as hypothermia.

An example of the far-reaching impact of the oil spills is the Exxon Valdez oil spill that lead to the death of about more than 2500 sea otters, about 300 harbor seals, and approximately 22 killer whales. That is just the momentary and visible cost of the oil spill. An extensive team of scientists later carried out a longitudinal study of the affected region and found that the effects of the spill could be felt even years after the spill. These consequences included the increased death rate and extremely stunted growth. It is after thirty-five years of the disaster that the team found that the Prince William Sound ecosystem finally smelled of being on the path of recovery and other apparent effects on many animals such as the sea otters seemed to have disappeared as well.

It is also important to note that related carbon emissions are also closely linked with Trade as according to a survey in 2015, the transportation sector combined which is the largest contributor of providing Trade and making it a possibility in the first place, amounts to about 18% of the total carbon emissions.

Those who oppose the concept of globalization point out that Trade is harmful to the environment on a global scale. These people usually believe that “in open economies a race to the bottom in environmental standards will result from governments’ fears that enhanced environmental regulation will hurt their international competitiveness, the result is a race to the bottom in environmental standards.”

Jeffery Frankel and Andrew Rose Study – A Fall to the Top

The Research Associates at NBER, Jeffrey Frankel and Andrew Rose, studied the consequences of the prevalence of Trade in 1995 in a positivist analysis. Their findings included that “the impact of Trade on at least three kinds of air pollution appears to be, if anything, beneficial, not adverse, for a given level of income. Openness, measured as the ratio of Trade to income, appears to reduce air pollution. The level of statistical significance is high for Sulfur Dioxide (SO2), and moderate for Particulate Matter and Nitrogen Oxides (NOx)”.

However, it must be kept in mind that correlation does not equal causation. The apparent linkage of the two, between pollution and Trade, could have arisen from someplace else. There is a high chance that the places or countries that have more implementation of democracy might be more inclined towards Trade and may be more concerned with improving environmental facilities and policies. Moreover, there is also another postulation that higher levels of national income might be liked with Trade and environment in more than one way.

This study tested the causality between the concept of Trade and how the environment is linked with it. It does so by keeping the income level constant and under control while testing the outcome of free Trade on the environment. Later the researchers focus on exogenous factors such as distance, other geographical aspects, scales of growth, investment, education, and population.

These researchers also make use of the “Environmental Kuznets Curve” to measure the three aspects of air pollution. This concept, as explained in their study, suggests that “growth harms the environment at low levels of income, but helps at high levels. At higher levels of income per capita, growth stimulates the public’s demand for improving environmental quality, which in democratic societies is brought about through environmental regulation.” The researchers postulated that “SO2 pollution, for example, peaks at income levels of about $5,770 per capita, and thereafter starts to decline.” This analysis is in-line with many economic teachings that put forward that growth leads to many different types of pollution, such as air and water, especially when the region is going through industrialization. However, this gradually and ultimately leads to a reduction in pollution since with the passage of time, countries involved gain a stronger economic standing and become self-sufficient to clean up the pollution they create. It can be said that where the technology involved in Trade leads to pollution, it also leads to an increase in the income levels that ultimately aids in leading to an increased demand in environmental quality that places a force on the supply side to make positive changes in the environment.

The study of Frankel and Rose conclude that it is after a fall in environmental conditions that a change is observed in the environmental patterns and the environment starts to see an improvement. This entails that in the short run, Trade may deteriorate the environment to an extent, but in the long run, it actually benefits the environment by improving the conditions.

Conclusively, it can be seen that the impact trade has on the environment is multifaceted. There are many positive outcomes and many negative consequences of Trade on the environment. Some positive results include the models of the scale effect, the technique effect and the composition effect; moreover, the economic growth and the improvement in environmental policies. Trade also has some seriously dangerous consequences that include the overbearing cost of pollution. Pollution of different types is caused by many surrounding aspects of Trade. For instance the transport burden leads to the emission of harmful carbon emissions. A major threat is posed to marine life because much of the Trade is carried out using ships and cruises via seas and ocean routes and there are serious cases of oil spills whose consequences may last for decades. Lastly, the study by Jeffrey Frankel and Andrew Rose serves as a bridge between these two opposing beliefs. Their findings postulate that Trade initially will result in environmental harm but, in the long run, can actually improve the environment. 


World Trade Organization,

Nicolas Korves, Inmaculada M. Zarzoso, Anca M. Voicu, (2011) “Is Free Trade Good or Bad For the Environment? New Empirical Evidence,”, September 9th, 2011

Shruti, “The Gains from Trade (An Overview),”

“Is Trade Good or Bad for the Environment?”,, May 28th, 2020

Larry West, (2020) “5 Environmental Consequences of Oil Spills”,, February 4th, 2020





This paper aims to show that during the Great Depression, which started on October 29, 1929, and continued until 1939 when the second World War began, was a period of massive suffering for the citizens. The country suffered at all fronts; there was an exponential increase in poverty as exports and imports fell, investment in local industries reduced dramatically, and output was at a recorded low, the rate of unemployment became extremely high which contributed to the decrease in consumerism. As the condition worsened, the municipal and provincial governments, as well as the volunteer organizations, could not do much to help the citizens. Therefore, the federal government stepped in to solve the problem through the implementation of several acts, provision of relief and by creating employment opportunities. The role that the government played during the Great Depression eventually led to Canada becoming a welfare state.

First of all, it is necessary to understand Canada’s context during the 1920s to understand why it was so devastated when the stock market in New York crashed. When the first World War ended, the whole world—except the United States—had suffered massively. However, Canada soon propelled out of the slump as it began to export minerals needed in the production of goods such as automobiles and electronics increased. The mining industry saw a boom as more and more US investors became interested in mining of minerals such as zinc and copper. Not only this, “US carmakers had plants in Canada able to produce half a million automobiles a year” (Clements, 2012, p. 210) which also stimulated the Canadian economy. Added to this, the agricultural yield in the year 1928 was record-breaking. All these profited the economy, but it is imperative to note that the Canadian economy was heavily dependent on the economy of the United States. Unsurprisingly, when the New York stock market crashed in October 1929, the effects were felt profoundly by the Toronto Stock exchange as well. The Great Depression that followed was extraordinarily severe, and its effects continued to be manifested in every domain for the next many years to come, so much so that Canadian authors have termed the 1930s as the “ten lost years” and “the dirty thirties”.

During the Great Depression, Canada saw dramatic deflation as “from 1929 to 1933, Gross National Product fell by 42 per cent in current, and 29 per cent in constant dollars,” (Horn, 1984, p. 3) income in 1933 dropped to being just 51 per cent of what it used to be in 1929, and “imports by volume were down by a huge 56.7 per cent from 1929 to 1933” (Horn, 1984, p.3).While the whole world was suffering, Canada was pressed at several fronts. Trade deteriorated as well; “average export prices for all Canadian goods in 1933 were only 62.6 per cent of what they had been four years earlier…[while] import prices were still 71.3 per cent of what they had been in 1929” (Horn, 1984, p.5).It did not help that one of the economic warfare strategies employed was the placement of high tariffs and export subsidies. This caused the exports to decline and therefore, Canada that relied heavily on exporting of raw and semi-produced good suffered substantial economic losses.

At the same time, different parts of the country fared differently. Western farmers, especially the Saskatchewan—who were heavily dependent on the export of wheat—suffered most. Not only were their crops plagued by droughts and grasshoppers, but now they also had to compete with Argentina, Australia, Russia, as well as the United States. During the Great Depression, prices had fallen, and the currency was devalued, so all these countries were trying to export their surplus crops. “Prior to the Great Depression, exports of wheat and wheat flour were between 7 and 8.5 per cent of GNP, roughly a third of total exports” (Amaral &MacGee, 2016, p.6). However, “wheat exports (in bushels) fell by 25 per cent between 1927 and 1933 and the price fell by over half. The fall in our exports was due to both the quantity exported and the price falling in half by 1933” (Amaral &MacGee, 2016, p.7).Their loss can be assessed by the fact that “the total provincial income was little more than one-quarter in 1933 of what it had been five years earlier” (Horn, 1984, p.5).

A decline in agricultural export is only one component of the larger picture, but one thing was connected to a multitude of other things. As the demand for wheat declined, it negatively impacted the functioning of railways. Firms that produced capital goods such as tractors could neither continue to maintain the same output, nor did the people have the same power of buying and saw meagre sales. “Export-oriented areas and industries, miners in Cape Breton and on the British Columbia-Alberta border, forest workers in Quebec, Ontario and British Columbia: these and others like them suffered severely” (Horn, 1984, p.9).Workers in sectors such as those of finance, services or retail were usually still employed, but many of the blue-collar workers fared worse-off and were laid off. Average unemployment rates in 1933 range from 19.3 to 27 per cent, whereas in 1929, the unemployment rate averaged between 2.5 to 4.2 per cent. In May 1933, one-third of wage earners no longer had a job.

It was not just the earners who suffered. One-third of these unemployed meant that not only them, their whole families suffered. Not being able to pay for education meant that many children were taken out of schools. At the same time, fresh graduates were stepping into a world where there were no jobs. Doctors, engineers, lawyers were depressed as there were not enough people who would be able to pay for their services, especially when highly experienced practitioners were also competing. All this meant that the country was forced to take a step back in technology. Poverty in rural areas was not lesser, but it was relatively easier to bear that when you could sustain yourselves through growing your own food. So, the rural to urban migration that gained momentum in the nineteenth century stopped, and more people were likely to move to western provinces or the farmlands basically.

People in the cities had to be fed and kept alive. The population out of work and unable to feed themselves was so high that neither the provincial governments nor the non-profitable organizations could provide food and shelter to them for more than a few days. Therefore, it was “only government that could keep thousands of Canadians from starving or freezing to death. Relief, by 1935, cost the Canadian government a total cost of $173 million” (Horn, 1984, p.7).By 1933, around 1.5 million people were dependent on the government for basic needs. This number increased to 1.9 million in 1934, which shows that even though the Great Depression is said to be ended by March 1933, people were still devastated in Canada. When people could not even afford food, they went “on the pogey.” “Pogey,” that was relief provided by the government in the form of cash or vouchers.

  1. L. Mackenzie King was Canada’s Prime Minister when the Depression broke out. He took a lot of time even to acknowledge that the country was in a state of economic crisis. When he did, he made little measures to provide relief to the people. He had the mindset that the responsibility of creating jobs to reduce unemployment fell on the provinces. His unwillingness pushed him out of government, and R. B. Bennett was elected as the Prime Minister. Bennett, a Conservative, also held the same beliefs. Both King’s and Bennett’s “reluctance to tackle unemployment contributed to a fiscal collapse in the four western provinces and in hundreds of municipalities” (Struthers, 2013).However, once in office, Bennett allocated $20 million for relief programs. Work camps were part of the relief system Bennett had devised in the early 1930s. These work camps were operated by the Department of National Defence and were aimed to help young men who were otherwise ineligible to receive relief. Far from city centres, these men would get a room, medical care, and a meagre amount of $0.20 for their daily expenses, in exchange for their manual labour on projects. However, “in 1935, a protest against conditions in the camps culminated in the Regina Riot. This was Canada’s most violent episode of the Depression” (Struthers, 2013).

As a response to the federal government’s persistence that providing jobs was the responsibility that laid on the shoulders of the provinces and that people are responsible for their well-being, several reforms from opposing parties sprang out. Occurring at a provincial level, these movements’ main objective was that it was the government that initiates recovery. One of these was these were the Social Credit theory, proposed by William Aberhart. He “sought to increase consumer spending by issuing credits worth $25 a month to citizens. Not wishing to encourage idleness, these dividends could be suspended if people refused available employment” (Clements, 2012, p.218).Unsurprisingly, farmers of Alberta were thrilled by this promise. Others who proposed alternate strategies to revive the economy included,“the British Columbia Premier T. Dufferin Pattullo, the democratic socialism of J.S. Woodsworth and the Co-operative Commonwealth Federation (CCF) as well as the Union Nationale in Quebec, led by Maurice Duplessis” (Struthers, 2013).

Along with these, other groups such as “the Workers Unity League, the League for Social Reconstruction, the Relief Camp Workers Union, Jeune-Canada and the National Unemployed Workers Association” (Struthers, 2013) which used the unemployed frustrated population to participate in marches and protests did push Bennett into taking a number of measures. The Canadian Wheat Board was set up to provide shelter to prairie farmers and design strategies to market their wheat to the world market. Other acts—such as the Farmer’s Creditors Arrangement Act and the Prairie Farm Rehabilitation Act—were implemented to help ease the debt of farmers and to propose solutions to the drought their lands faced. Following this, the Bank of Canada was set up to formulate the government’s monetary policy. Moreover, Bennett proposed the New Deal, that finally reflected an aggressive approach to tackle the economic crisis, contrary to what his beliefs had been. Bennett’s new deal was supposed to deal with wages, hours of work, natural resource marketing, as well as provide unemployment insurance. Before it could be implemented, Bennett lost office, and King was re-elected who was not in favour of this act. He realized the need for the state to provide long-term relief to the citizens and in 1940, “the federal government assumed responsibility for the jobless by introducing a national unemployment insurance scheme and employment service” (Struthers, 2013).

The transition of the state to provide public investment to create jobs so that the rate of unemployment could be decreased as private investment failed to do so, were in line with the economic theories of British economist John Maynard Keynes. Keynes’s ideas influenced the National Employment Commission report (1938) and the report of the Royal Commission on Dominion-Provincial Relations (1940). When World War II broke out, Keynesian economics actually became integrated into the government policy, only to shape the country as a welfare state. Through active measures by the government and “the massive state expenditures necessitated by the war finally reduced unemployment to minimal levels by 1942” (Struthers, 2013). In the long run, the Great Depression directed the government into taking more active roles in providing people with relief, grants, employment opportunities and facilities.

Conclusively, the years during the Great Depression were extremely difficult for the citizens as well as the governments in power. Its impacts were continued to be faced for successive years. However, during these testing times, the government was pressurized by opposing parties, groups, and the public to take a more active role to think about their well-being and to create jobs through the investment so that the economy could retain its economic footing. In retrospect, “some of the developments that made Canada one of the most robust welfare state systems can be traced back to the 1940s,” (Vivekanandan, 2002)to the time when the country had successfully come out of the “bitter thirties” with the “vision to build a new Canadian society based in equal opportunities and equal facilities, with employment security for everybody in the country” (Vivekanandan, 2002).






Amaral, P. S., &MacGee, J. (2016). Trade, Relative Prices, and the Canadian Great           Depression.

Brady, A. (1940). Report of the Royal Commission on Dominion‐Provincial           Relations. Canadian Historical Review21(3), 245-253.

Clements, P. (2012). The Great Depression and the Americas 1929-39. Hodder Education.

Horn, M. (1984). The Great Depression of the 1930s in Canada (No. 39). Canadian Historical       Association.

Purvis, A. B., & National Employment Commission. (1938). Final report of the National   Employment Commission, 26th January 1938.

Struthers, J. (2020). The Great Depression in Canada | The Canadian Encyclopedia.               Retrieved May 20 2020, from              

Vivekanandan, B. (2002). Welfare State System in Canada: Emerging Challenges.             International Studies, 39(1), 45-63.



Case Study Questions

Pandemics do not just affect health, they also rip individual economies aspect too. For many people  affected  by  the  coronavirus,  including  those  who  do  not  fall  sick,  economic  survival will be a primary concern. When businesses closeand workers no longer get paid, the bills for unpaid  rents,  mortgages  and  consumer  loans  quickly  accumulate.  Cities  have  already  shut down of their transport services, shops, cafes and cinemas. Mass lay-offs are on the horizon. Unemployment insurance willcover some, at least for a time. But self-employed and temporary workers, and households that live pay-cheque to pay-cheque, do not have such buffers.The 2008 crisis should have been a reminder that debt is not a substitute for income. Likewise, ensuring households can afford the basics of everyday life by broadening access to loans and credit cards is no replacement for effective social policy. But instead of heeding these lessons, governments focused on fixing the financial sector, bailing out the banks to ensure they would lend again.As  a  result,  we  are  now  watching  two  overlapping  crises  unfold:  the  coronavirus  pandemic, and the economic threat it poses to our debt-fuelled economy.


We urgently need debt relief –especially  for  households  at  the lower  end  of  the  income  and  wealth  spectrum.  Most interventions  that  governments  have  taken  so  far  have  targetedfinancial  markets   and businesses. Unless governments also implement measures aimed at indebted households and renters, such measures are unlikely to prevent a meltdown driven by rapidly falling demand for goods and services. The  economists  Gabriel  Zucman  and  Emmanuel  Saez  have  called  for  asocial  insurance schemeto  tackle  the  economic  shock  wrought  by  coronavirus.  This  would  broaden  the government’s role, making it not just  a  lender  but  a  buyer  of  last  resort.  The  scheme  would compensate for the demand that has evaporated from the economy. With the airline industry, for  example,  if  demand  for  flights  drops  by  80%,  the  government  would  buy  80%  of  plane tickets.  Small  and  medium-size  businesses,  which  are  the  least  insulated  against  economic shocks,  are  most  likely  to  benefit  from  this  intervention.  Still,  on  its  own,  this  would  not alleviate the stress of many deeply indebted households.


To  be  sure,  it  is  not  easy  to  tailordebt  relief  to  only  truly  distressed  households.  There  will always be free riders who will take advantage of debt relief packages without needing to do so. But this should not prevent governments from intervening now. There is no better example of an  exogenous  shock  than  coronavirus.  The  overriding  concern  today  should  not  be  moral hazards, but massive default rates that will leave millions of people destitute.To treat the economic fallout of coronavirus, governments should directly assume the debt of high-risk households. It is often said that the public health of the majority is determined by the most vulnerable in society. The same logic applies to a healthy political and economic system: its stability depends on how it treats its weakest members. Hedging our bets on an economic system that has neglected these truths and instead prioritised wealth creation at the top has put us all at risk. There is still a small window to rectify these past wrongs, by urgently granting debt relief to the households worst affected by coronavirus.

Source: Adapted and modified from The Guardian, 18 March 2020, Why debt relief should be the answer to this coronavirus crash, viewed on 26 March 2020, <>.

Question 1

Evidence the group of life-cycle stages being affected most during the Coronavirus crisis?(30 marks)

Question 2

Discuss the financial concern encounter by household during the Coronavirus crisis (note: To answer this question, you need to ask at least FIVE (5) persons regarding the types of financial concern). (30 marks)

Question 3

Diagnose the TWO (2) Malaysian social securities’ being assign by government to ease the financial burden for household? Discuss the mechanism functions on how to help the affected household.  (40 marks)

Case Study Answers

Economy during Coronavirus

Question 1

Evidence the group of life-cycle stages being affected most during the Coronavirus crisis?(30 marks)


The economic business cycle is an indicator of the tide the economy usually follows through time. It consists of six major potions namely expansion, boom, recession, depression, trough and recovery in cyclical order and the company business cycle, hence, derives stages from the macro business cycle namely launch, growth, shakeout, maturity, and decline. The coronavirus has become a global crisis in a very short amount of time, and where many economists had predicted a global recession in 2020, they now foresee a world depression because of the severity brought forward by the novel virus and what its solution entails for now. The ripple effect of the virus is extremely important to be studied and analyzed to understand the new situation that the world might face and for that product life-cycles are essential to be looked at. Once the problem has been targeted, it might be easier to deal with it with a focused solution.

It must be understood that in an economic system followed today, one person’s spending is another person’s income. Added to this phenomenon is the undeniable reality of the strongly interconnected world we live in today that entails that if some mega disruption is caused in one part of the world, other countries are bound to feel the impact. The financial indicators used to explain the position of the life cycle commonly include cash flow, sales and profit. Taking a closer look at these will enable analysts to predict which one is being the most negatively impacted by the virus.

Sales mean the sale revenue generated by the exchange of good and services, and because of the virus, buyers are not encouraged to purchase because they are bound to stay at homes and follow social distancing. Profit entails the surplus amount earned on the product by subtracting the total costs from the total selling price, and since the sales have gone down by a large margin, profits have fallen. The most hurt sector appears to be the cash flow as it forms the basis to allow the impact on sales and profits. It is important to remember that the economy is the most stable when it is the most liquid, in other words, when the money flow is continuous, and there are no pauses. However, the epidemic is of such nature that has become a significant barrier in the flow of cash. The global demand has plummeted drastically as a result of almost one-third of the entire world being in lockdown. This can be evidenced by the fall in the oil prices as a result of a fall in demand. Here although this might benefit the oil importers, the oil exporter will lose out.

The hindrance in the cash flow has resulted in negative cash flow where the intake of money is lesser than its outflow. These can be felt by the governing bodies, especially as despite the cut down in spending by the people; the government has to support its people by giving out unemployment benefits, subsidies and easy loans.

Conclusively, the famous statement that “cash is king” is found to be evident in this scenario where the difficulty in cash flows are leading the world into an economic turmoil where many economists predict that it might be worse than the 2008-09 crisis. After analyzing this, decision-makers must introduce reforms and changes to fix the system to minimize the negative impact on the people.





Question 2

Discuss the financial concern encounter by the household during the Coronavirus crisis (note: To answer this question, you need to ask at least FIVE (5) persons regarding the types of financial concern). (30 marks)


The economic impact of the coronavirus seems unparalleled as many economists are predicting an economic depression to come. Many households are worried how the effect will affect them, but the most stressed are the daily wagers, whose income is dependent upon the very places that are being shut down and due to the lockdown, they are unable to carry out their jobs.

Daily wagers include people who do not have a fixed income but whose wage is dependent on how many orders they receive for their individual assistance, such as plumbers, electricians and labourers who are not linked with any formal sector firm. Lockdowns have been imposed in many countries to reduce the spread of the virus, and resultantly, these people are getting no orders and hence, in essence, are unemployed. Unemployment is the most feared outcome many households might face because of this pandemic. In such cases, many governments have come up with unemployment benefits, such as in Pakistan the Prime Minister announced that 200 Billion Pakistani Rupees would be distributed among daily wagers during this trying period.

Another problem the households are facing includes the payments of loans and rents during this pandemic. Many wagers have received payment cuts due to the pause in production cycles. Hence paying bills, repayment of loans, instalments and paying rent can become a great source of stress for many households.

Moreover, another one of the primary concern for many households appears to be coping up with raised prices of necessary goods in their local markets coupled with the shortages of some products as a result of supply chain disruptions and panic buying.

Furthermore, those households that have a single breadwinner feel severely burdened during this pandemic. Especially the ones who are daily wagers and small business owners who are taking a severe burn from the crisis. The UN reports that 220 Billion Dollar loss might be faced in developing countries.

Additionally, the households that derive their incomes from those industries that are unable to adapt to the most suitable pattern in the crisis, in other words, are unable to convert their business and industry to a digital platform, such as spas, event, tourism, are facing a severe blow as well. Many businesses like the education sector and some medical advisory bodies have digitalized their structures and are rather capitalizing from this epidemic while the business that is unable to do so either because of their nature, or by the lack or skills, resources or structures, are suffering. This domino effect reaches the households of these businesses, and hence they feel the burden of the economic hardships under the covid-19 emergency.



Question 3

Diagnose the TWO (2) Malaysian social securities’ being assigned by the government to ease the financial burden for the household? Discuss the mechanism functions on how to help the affected house. (40 marks)


The Malaysian government has taken plausible action to ease the economic hardships felt by its people. Many social security policies have been made in an attempt to minimize the financial fallout of the coronavirus. According to the Malaysian Inland Revenue Board some leniencies in the taxation department include the announcements that “No penalty will be imposed on late payment of taxes provided the payment is made by 30 April 2020”, “there is an extension of time—until 30 April 2020—to submit Form CP204B, Submission of Notification of Change in Accounting Period, which is due in the period from 18 March 2020 to 29 April 2020”, and “An extension of time until 30 April 2020 is allowed for submitting documents for tax audit or investigation, otherwise due within the period of 18 March 2020 to 29 April 2020”. Further, the interim government of Mahathir Mohamad also came up with economic aid, specially dedicated to the country’s tourism industry. About 4.8 Billion Dollars have been dedicated to supporting the tourism industry on top of the fringe benefits included in the package for the industry. These two policies targeted towards taxation and tourism will ease out the economic strife of many households.


The ease in taxation is an indication of the fact that the Malaysian government understands that health comes first and is the primary concern. Hence, the delay in tax payments granted by the government to its people will not only increase people’s trust in the government but will also encourage them to stay at homes and put their heaths as a priority as the date extension has bought them time. The Malaysian households have gotten hope that their government is with them during these trying times and hence has reduced the pressure of filing out tax returns in the middle of an epidemic.

The second policy that is solely targeted towards the tourism industry is an important one is stabilizing the households as tourism is one of the major industries of the country as evidenced by the fact that it forms about 13.3% of the country’s GDP (2018 Report). A large portion of the Malaysians are involved in this business, and many low-income families too are linked with the tourism industry. Hence, providing reliefs to the industry will target the people, low-income households, who are expected to be the most hurt during the economic struggle.

Hence, it can be observed that the Malaysian government is dedicated to standing together with its people in these difficult times by proving them with social relief policies in places where they need it the most. The taxation department and the tourism industry concerns many and covering these two entails that people related to these aspects will find some relief and find peace in their household to an extent.




GEPPS Research Project

American and Chinese economies

In America and China, many global, ethical, political, physical, and societal indicators highlight how both nations operate. Both nations are not allies, mainly because there is no overriding security interest. There are also no values regarding political aspects because of the concepts about this context. Beijing looks forward to a multipolar post-American world while Washington is trying to implement power wanes and preserve its liberal order. The scope of both nations is different in terms of ethics, legal aspects, and societal context (Dittmer, L., & Liu, G. 2006). The steady market reforms of China have shown that state-directed stimulus is related to mixed economy aspects, and it works for the low return investment, whereas this is not larger than the market economy.

The US has a strong and largest economy in the world for over 140 years. The GDP of the country is 22% of global GDP, but China is overtaking this ratio in terms of economic strength (Hong, Y. 2017). The GDP of China is based on purchasing power parity that highlights how economies can be stronger at absolute levels. In China, consumer goods are not expensive, so economists highlight that purchasing power is related to the money amount. Money is spent on similar goods and services when a country experiences low prices than others, and it provides an evaluation of income on the price differences. For example, the role of purchasing power party is central in evaluating price difference, if earning in New York is $50,000 per year, it is different from Beijing which is $50,000 per year, both will operate in different conditions, but the observations will provide a different data (Langfitt, F. 2014).

The United States of America is ranked number one economic power in the 21 of the 34 surveyed countries, while China is believed to be a top economic power by other 12, where there is a tie for top economy between China and USA in Lebanon. Usually, many non-European nations consider the USA as the top economy of the world, whereas many European countries like to see China at the top(Tauhman, B. 2007). For instance, in the survey of the countries in Asia-Pacific, around 46% state that USA is the top economy, whereas china has been suggested by 25%. In most of these countries, also, there is an ambiguity about the dominance of the USA and China, with such difference among the share about which country select the China and which country select the USA as the top economic power. Similarly, more think the USA is the top economy as compare to China in the sub-Saharan surveyed countries, but the people have different opinion. In South Africa and Nigeria, the trend to select the USA is a departure as of last year, where many from both of the countries term China as the top economy of the world.

To develop an understanding regarding the basic differences in American and Chinese ethics and culture, a visional image of Chinese and American ethical philosophies is pretty helpful.  The researchers describe that the foundation of ethics can be found in the larger level ethical environment and in the personal-level beliefs, both of these are made on ethical philosophies. Economic national norms and ideology are the most primary factors in the international set-up(Brockman, J., Pinker, S., Vinge, V., Rees, Sterling, B. 2014).

In the United States, business agreements describe the nature and the particulars of a business connection together with the commitments of all involved parties. It is a culture that these obligations are privileged to the letter mad the spirit of the agreement. People must be bound to such contracts once entered. It is both ethical and legal obligation by all the parties and shows the basic faith in truth. Agents of business will try to work in deals which are very valuable to the business parties they are working with. The signing of agreement is generally taken as the final part of the business association (Hong, Y. 2017).

Business ethics in China are influence by many factors. They trust that all the things must be in harmony, getting the things analyzed for longer terms. If the changes will be significant and disrupting, the Chinese must prefer not to involve in any kind of action. This sentiment is rooted in Taoism and Confucianism. Harmony is underlined to keep public order and peace and noticeably shows the way Chinese behave and think. Agreements and negotiations connect people by strengthen the human relationships more as compare to the legal binding. Managers in China take agreements as the initial step to a stronger business association with the partners.

Financial crisis in USA resulted in the assumption among the ordinary citizen of America is that the China has developed itself as the strongest economic power in the world(Brockman, J., Pinker, S., Vinge, V., Rees, Sterling, B. 2014). This perspective flourished in the toughest financial crises of 2009 and has continued even then the crises impact has started to decrease. United States media have regularly communicated the same thought. But it was deliberately illogical.The basic cause for Americans’ disappointment is the job opportunities. USA joblessness falls to 9 percent in the last two years. It became more when a number of Americans stopped searching for jobs. In comparison, Beijing disclosed less than 4.5 percent figure of its unemployment, but the included only such people who were reported officially(Tauhman, B. 2007).

The size and growth of the economies of China and Us have a relationship between capitalism and democracy. A look at the Chinese capitalist system and democracy clears the situation. From 1958- 1962, in China, 45 million people death occurred due to the largest social experiment. This experiment was Great Leap Forward, yet known as a disaster for China. It is a leading nation for export and is ahead of the United States. Scott, B. R. (2011) discussed the history of china did not allow to escape from poverty, but World Bank figures show poverty in China was 88.3% in 1981and in 2015; it was 0.7%. A third way was deployed as a success factor for the political and economic model that was grounded as socialism and capitalism. China is successful because the power of capitalism is exercised (Bergsten, C. F. 2007). Mao has an omnipotent grip on the economy of China, so the past few decades progressively held the concept of the free-market economy by reducing powerful impact and introduced private ownership (Hong, Y. 2017). Political capitalism forces are contributing to economic success because it is contributing to economic development.

Most of the reform reminded leaders in China are behind the success of capitalism because these methods stimulated economic growth. The economic reforms legalized private enterprises to move towards shareholders, partners, and individuals. Large scales of business and opening of stock markets allowed the setting of prices and wage rates, so supply and demands in the free markets established. The red hats reforms in this way allowed the Chinese to become red capitalists. The capitalist reforms brought many growing pains for economies. In rural provinces, families lost jobs, and the investment rate declined due to state-owned enterprises. Democratic reforms in China since 1976 allowed the communist party to do monopoly as decisions were only made by few elites. Due to democracy, people faced a free environment by discussing their public matters. In this situation, the government worked hard on individuals to bring social stability (Brockman, J., Pinker, S., Vinge, V., Rees, Sterling, B. 2014). The democratic or capitalistic economy in China allowed industries, farms, and enterprises to enter into profit-making frameworks. Free market demand and supply set price level, wage rate, and production.

Capitalism and democracy in the US are not related to each other but are two ideological pillars that can bring unprecedented freedom and prosperity. In Europe, corporate restructuring has changed the role of social welfare and job security. Democracy required adherence to social and informal regulations that can bring flaws in the constitution design. These rules also protect the threat of power about charismatic leaders. Democratic norms in the wake of the rule of law allow maintaining policy battles to secure the interest and freedom of policy. Social democratic policymakers foresee some symptoms about federal and state policies that work to levy a tax on the wealthy. There are two opinions about democracy’s impact on the US; one is in favor of capitalism, and the second is against it. Liberal intelligence activists try to save democracy and enhance involvement in political activities. It is also observed that democracy is beneficial to social trust and encouraging voter participation as well as civic engagement (Capitalism, C. 2018).

Trump’s involvement in development activities is seen under democratic reforms.

The impact of the Internet on the two national economies, China and America, is significant, with the change in time, this impact is becoming stronger, in the form of societal, global, ethical and way of socializing. Enormous sizes of business and opening of securities exchanges permitted the setting of costs and compensation rates, so supply and requests in the free markets set up. The red caps changes thusly permitted the Chinese to become red industrialists.The method of sharing information, ideas, and organizing flow of concepts is facing transformation. Increased connectivity through the internet has evolved all the economies in terms of social, economic, and technological aspects. These stages of transformation are also impacting on industrial factors. These technological factors are transforming the agricultural and health sectors (Scott, B. R. 2011). In the US and China, technological innovations are creating opportunities for economic development. The access to infrastructure, better facilities, and the internet ecosystem have paved the way for development. In addition, it has also built a system of competition where every company is competing, and entrepreneurs are trying to thrive.

The nurturing of human capital is maximized due to internet globalization and interaction between global economies. The Internet is making a strong contribution towards economic growth. In both nations, the maturity of the internet is at peak, and it is increasing living standards because it is similar to the advancement in increasing per capita income, so magnitude is a positive impact, since it enhancing internet-related growth. Business transformation is increasing due to community involvement in the value chain. Manufacturing has been revolutionized because products and services are technically improving, so a dynamic framework for business is operating (Capitalism, C. 2018). In different countries, fast-growing ecosystems are growing the use of the internet so better access and infrastructure are increased. Large economies are focusing on better manufacturing options with integrated developments under diversified supply chain. The performance improvement is seen under technical organizations because web-savvy SMEs are continually bringing development context into consideration (Dittmer, L., & Liu, G. 2006). Web knowledgeable small-medium enterprises are introducing more opportunities than other companies because internet involvement is significant in increasing exports.

US and China define capitalism in relation to national political policies as a compressive framework that can accelerate economic development. In China, capitalism is a part of all the systems such as political, social, and cultural control in all over the economy because it is linked with state-owned policies (Charles, F. 2013). The Chinese government is successfully implementing the policies of capitalism to bring growth and economic development as a part of national policies. For example, Chinese agricultural aspects are decollectivized, and certain reforms are introduced. China is now considered as an increasing hub of global economic growth due to its superpower aspects. However, some commercial conflicts prevail in this realm that is playing a key role in installing a successful system. Chinese authority, as a socialist country, assumes authoritative capitalism. China and capitalism are showing powerful relationship because social theories are building interrelated structures in society (Tauhman, B. 2007). Political private enterprise powers are adding to financial achievement since it is adding to monetary turn of events. A large portion of the change reminded pioneers in China are behind the achievement of free enterprise on the grounds that these strategies animated monetary development. The monetary changes sanctioned private endeavors to move towards investors, accomplices, and people.

US capitalism is enacting national policies under democratic regimes. US economic system has focused on Keynesian capitalism systems and ideas to support economic and monetary policies. Political economies are facing capitalism, private ownership structure, and legitimate means of transferring property are considered in the US under a policy framework. Keynes’s perception about macroeconomic forces that stand for the capitalist rules, and it needs government to act as under the business cycle framework. The business activities and political framework in relation to the economy activity. Socialism and capitalism are seen in different national policy to set up the planned economy. The impact of US capitalism framework on production activities is based on profit. US is a capitalism society where government is making national policies regarding taxation, regulation and subsidy. The democratic capitalism in America is making the ideology regarding tripartite system of market so a democratic polity prevails. In various nations, quickly developing biological systems are developing the utilization of the web so better access and framework are expanded. Enormous economies are concentrating on better assembling choices with coordinated improvements under broadened inventory network.

Economic growth and personal freedom are interlinked if viewed by the perspective of US and China. Growth is an essential factor in American where more opportunities are being generated for the people (Dittmer, L., & Liu, G. 2006). The economic freedom is to make the economy and autonomous one that can support the regulation process of the economy. The economic freedom in America is related to free trade, rule of law and property rights. This aspect is also linked to the constitutions of government and enable it to make a long last economic growth, prosperity and opportunity. The economic freedom allows prosperity and freedom creates a connection for economic segments. This relationship matters most for the economy of China. The economic freedom thrives societies and engage them in financial authority. The Chinese economy consider freedom a fundamental right for human being so the score of China is 59.5% that is making the economy get highest GDP growth. The personal freedom and economic growth is also seen under the political policies. The both entities are linked in terms of democratic policies and considered a basic right for community as it helps develop certain segments of the society (Cruxer, T. 2018).


Bergsten, C. F. (2007). The United States and the world economy: foreign economic policy for the next decade. Washington: Institute for International Economics.

Brockman, J., Pinker, S., Vinge, V., Rees, M. J., Dennett, D. C., Dyson, G., … Sterling, B. (2014). What should we be worried about?: real scenarios that keep scientists up at night. New York, NY: Harper Perennial.

Capitalism, C. (2018). Map of China. Capitalism Without Democracy, xviii-xviii. doi: 10.7591/9780801461897-004

Charles, F. (2013). Predator Nation Corporate Criminals, Political Corruption, and the Hijacking of America. Crown Pub.

Cruxer, T. (2018). China Matters: Chinas Economic Impact in Latin America. The SHAFR Guide Online. doi: 10.1163/2468-1733_shafr_sim190130006

Dittmer, L., & Liu, G. (2006). Chinas deep reform: Domestic politics in transition. Lanham, MD: Rowman & Littlefield Publishers, Inc.

Hong, Y. (2017). Driving Capitalism to Western China. University of Illinois Press. doi: 10.5406/illinois/9780252040917.003.0002

Langfitt, F. (2014, November 7). Capitalism Is Making China Richer, But Not Democratic. Retrieved from

Scott, B. R. (2011). The Transformation of US Capitalism and Democracy, 1830–1937. Capitalism, 427–514. doi: 10.1007/978-1-4614-1879-5_13

Tauhman, B. (2007). Economic Impact of Internet in China. Chinese Business Review06(01). doi: 10.17265/1537-1506/2007.01.004




  1. Discuss the key characteristics of three main market structures, perfect competition, monopoly, and oligopoly?

The four main market structures that exist in the 21st century’s capitalist world are perfect competition, monopolistic competition, monopoly, and oligopoly. Each structure differs in terms of the number of firms (sellers) and buyers, freedom of entry, nature of products offered, and the demand for certain products within any market. This feature delves into finding out the essential characteristics of perfect competition, monopoly, and oligopoly and how one differs from others.

Perfect competition denotes a market structure that can simply be put be described as the “free market.” The number of buyers and sellers in this market is numerous, which means that buyers are not forced to buy their essentials from only a few sellers, and neither can sellers sell only to a selected few customer base. Restrictions for new-comer sellers in such a market are negligible. Hence there is considerable competition among the sellers, which makes them want to excel in their services as a result of which buyers have many options about substitutes, quality, and prices. Besides, in such a market, no seller has the absolute power to influence or determine rates individually. As far as firm revenues are concerned, firms operating in perfect competitive markets earn zero net profits because when firms start making positive economic profits in the outset, more firms enter the industry considering it a valuable one. However, with the ensuing competition, prices drop, causing losses and the exit by many firms that entered the market. This lead towards higher supplier by fewer firms which earn them profit, but the net profit remains zero at the end.

The second prominent market structure is the monopolistic structure in which there is only one seller, although buyers are many. In the monopolistic markets, due to the lack of competition, the seller determines prices as they desire and making supernormal profits. There is no threat to the hegemony of the single seller as there exist enormous restrictions for entering the particular market in the form of licenses, patents, the technological superiority of the hegemon, lack of substitutes, and control over raw material or other essential products needed for the manufacturing of any product.

In the oligopoly market structure, there are various sellers but still less than in the perfect market structure. Each seller has a significant share in any industry overall. Because the competition is relatively nominal as compared to the perfect competition, so the firms set prices as per their wishes in this structure too. Often times, firms functioning in such structures also collude together to set prices or outputs at certain levels to earn almost supernormal profits. They adopt this colluding technique because, at the peak of their collaboration, they cumulatively act as a monopoly. For this purpose, they may also lower their supplies so that the collective output equals just to that of a monopolistic structure. Nonetheless, they somehow compete via different advertising techniques, etc. however, there also exist some factors that might call-off collusion. For example, in several places, the fixation of prices by the firms is illegal as in the United States. Moreover, when the only competitors in the market are one’s arch competitors, then it gets challenging to cooperate over something that will affect one’s earnings and profits. Similarly, price-leadership is also a significant characteristic of the oligopolistic market structure. In this mechanism, that can also be described as parallel pricing, the dominant seller in the market set a price, and the rest of the sellers have to follow because they will not be able to afford to compete with the dominant seller by selling at higher rates.

  1. How does a monopoly market differs from a perfectly competitive market? Which is more preferable for consumers? Use a diagram to assist your discussion.

Monopolistic market structure is precisely opposite of the perfect competition market structure. In the former one, there exists only one supplier of any product or service. In the later one, there exist a lot of many suppliers, and customers have numerous alternatives to choose from in terms of the supplier or even the product or service. In the monopolistic market, prices are determined as per the wishes of the market hegemons who always try to earn supernormal profits whereas, in perfect competition, market prices are driven by rivalry among many competitors, which leads toward providing better quality products at lower prices to the customers. However, this is not the case in the monopolistic markets, where consumers are forced to t buy the available products mostly at unreasonably high rates. This factor can lead to innovation stagnation as the suppliers will not bother to improve their services because they are aware of the fact that the customers do not have any other alternative and will stay loyal to them although forcefully. On the other hand, in the perfect competition markets, competition leads towards production of more output, as also depicted in the graph, and innovation aimed at improving services or the quality of the products that any firm offers, which in turn makes the lives of the consumers easier as time passes.


For the reasons mentioned above, one can safely state that consumers prefer perfect competitive market structures all around the world over the monopoly market structure. Consumers in the perfect competition market have complete information about the products or services that they are consuming, as in about the processes and materials adopted for manufacturing and providing products and services, respectively, by a firm.They are also provided with a number of alternatives as well as with ample supply of outputs.


Perfect competition markets are an epitome of the free market, a concept mainly believed to have been proposed by eighteenth-century Scottish political economist Adam Smith. As advocated by Smith, such markets are regulated by an “invisible hand” that keeps the order of the market intact, particularly the prices, as clearly manifested in a perfect competition market. It is, however, important to note that perfect competitive markets do not exist in today’s world. The agriculture sector also only comes a little close to this structure.

From thegraph as well as from the analysis presented above, it can also be deduced that monopolistic market structures thrive at the expense of the consumers’ economic interests and producer surplus is far greater than the consumer surplus as also depicted in the below diagram.

Therefore consumers widely acknowledge that their needs get exploited in such a system and hence despise it over the perfect competition market.


Executive Summary


This paper is focused on the details of the rentier state. There is ample literature available on the history of the Middle East and why the countries residing in that region came to be known as rentier states. This paper explains the concepts behind the rentier state theory. It will also shed light on the theory’s limitations. Recent studies and geopolitical environments around the globe suggest that the economic and political conditions and development in Middle Eastern countries cannot get explained with the help of the rentier state theory. And as times progress, it has become less and less relevant.



Energy has always been a fundamental part of world politics. It has been responsible for shifting the authority and dominance from the hands of one country to the other throughout history. It has influenced alliances and wars between the world’s most powerful nations. The Middle Eastern countries play a vital part when it comes to the energy resources of the world. The political and economic framework in Middle Eastern countries is not the same as the countries in the West or even China, which is another essential country. It is safe to say that the political relations of the Middle Eastern world with the other powerful nations, especially those in the West or more particularly the United States, haven’t always been very cordial. They are often at an edge with each other. Middle Eastern countries follow the rentier state theory, and it plays a critical part in their political and economic development. However, as we approach modern times, the theory alone may not suffice to explain the countries’ political and economic development. The global energy geopolitics plays a vital role as well. A lot of research has been done on the rentier state theory in light of the Middle Eastern Countries. In this paper, we will be discussing the political and economic development of Middle Eastern Countries and whether or not the rentier state theory is enough to explain it, given the global energy geopolitics.


Rentier state

Let’s begin by explaining what a rentier state is. The rentier state theory aims to explain the politics and economics of the Middle Eastern countries. It was given majorly by Lisa Anderson (Anderson, 1987). Her work is based on the studies that majorly emerged in the 1980s (Altunisik, 2014). The idea of the rentier state was, however, first put forward by an Iranian academic by the name of Hossein Mahdavi (Mahdavy, 1970). It was further worked on by economists who put forward their work in the 1980s. Middle Eastern countries required another politic-economic framework because they are different from other countries in one central aspect. They are all oil-producing countries and, like mainstream countries, do not collect taxes from their population for revenue generation for the government. Instead, they collect rents and depend on them (Altunisik, 2014). Hence, the pace of economic and political development, and the approach towards it, is different in rentier states in comparison to rest of the world. They depend on their energy resources, and up till now, they seem to have been doing well, at least on surface level.

Altunisik (2014) mentions in his paper the three main characteristics of a rentier state. The first characteristic says is that revenues generated from oil get paid to the government as a form of rent. It makes oil a “strategic commodity,” hence, weakening the bond between the production price and the market price. The second characteristic points out that oil is sold and marketed in global economy to maximize revenues. And lastly, whatever profits get accumulated over time from the sale of oil in the global economy all comes under and in the hands of the state, which is solely responsible for deciding what they want to do with the money. Since these characteristics are prominently observed in Middle Eastern countries, they have earned the title of a “rentier state.” Concisely, a rentier state can be simplified as a state that depends on oil rent to sustain a major chunk of its economy and also use it as government revenues. It was later given by Luciani, who said that any country whose economic dependency on oil is up to 40 percent or more would get classified as a rentier state (Luciani, 1990). Based on this number, the following countries are rentier states: “Kuwait (88%); Qatar (87%); UAE (84%); Oman (81%); Saudi Arabia (80%); Bahrain (59%); Libya (58%); Iraq (n/a); Iran (55%); Algeria (53%); Yemen (46%)” (Herb, 2005).


Economic, Political and Social Implications of Rentier States

Rentier states are heavily dependent on oil and they accumulate profits earned from oil. Their economic framework does not include the usual modes of investment, interest, market prices, or various industries as in other countries. Hence, their growth and development, in comparison, gets affected. These arguments have been presented in the literature on rentier states. Mahdavy (1970) has talked about some of the economic effects in his article. Oil is a commodity that almost the entire world needs in one way of the other. So, of course, there is a significant inflow of money that goes into rentier states. It is much faster-paced than the revenue influx in mainstream economies where it is much smaller and slower. Now, this should seem to be a good thing for the oil states, but research and study suggest that this damages the economy and its steady development. Oil revenues have little to do with the local community and economy. They go directly to the state.  The oil industries do not contribute much to the domestic sector. It also builds up a façade of productivity and prosperity which surrounds a rentier state. The more accurate depiction includes development on surface level. Other sectors in the economy, and various other industries often go neglected (Altunisik, 2014).

Similarly, there are different political and social implications in a rentier state as well.Many of the most popular economic frameworks try and promote the idea of keeping the state intervention to a minimum in the economy of the country. Their involvement is to encourage the growth of the economy through policies and investments. Otherwise, it is highly dependent on market functions. The other role the government plays is to ensure welfare and security for the local population. Democratic governments also idealize autonomy and liberty for the citizens. All these values and concepts get contradicted inside a rentier state. The negation starts from the fact that the state is in direct control of the country’s most significant revenue resource, and also the sole bearer of all its fruits. So, the state automatically becomes very centralized and plays a vital role in the economy of the country (Luciani, 1987). However, there isn’t much the oil-state does for the local economy except for distributing the rent amongst them. They are majorly responsible for public goods and services and also are the main employers (Anderson, 1987). Rentier states still, however, do lack the proper frameworks for administration. Since they do not take taxes, most of their institutions, such as, fiscal, legal, or research institutions, are not well developed (Chaudry, 1989). So, rentier states are also “institutionally weak” (Altunisik, 2014).

The political and social structure of rentier states also impacts the general mindset of the people living in them. They have been conditioned over the years to accept these ways of things.They are not very concerned about development,in terms of industries and job markets, rather than what they can access from the state’s rent money. On the other hand, many outsiders are working in rentier states as well who come seeking jobs. The state does not give them the same incentives that are given to the natives, despite of their higher level of productivity and hard work in comparison. There are vast levels of disparities between them. Migrants don’t even get citizenship in Middle Eastern countries regardless of the decades they spend there and the services they do. It also impacts the unity and class system inside rentier states. The community gets divided as per ethnicities, tribes, or religion (Delacroix, 1980). Oil rents get given out in the forms of “employment, social welfare benefits, subsidies, and interest-free loans” or as a form of annual payments as is done in some Gulf monarchies (Altunisik, 2014).

The oil money has resulted in immense power in the hands of the rentier states’ leaders. It has helped them make powerful relationships and alliances with other influential groups, and similarly, it has also allowed them to downplay opposing powerful groups. Examples from Saudi Arab, Libya, and Iran can be given here. Oil revenues enabled the Nejdi al-Saud family to undermine and ignore the strength of the Hijazi group of merchants, which were a power threat to the state (Chaudry,1994). Furthermore, Libya was able to reform its political, economic, and social structure during the era of Qaddafi being a rentier state as well (Altunisik, 1994).

Similarly, the shah of Iran was able to dominate the “landlords and ulemas” due to the increase in oil revenues collected. It automatically shifted Iran’s power base paradigm. Homogenous cases of power are seen in other Middle Eastern countries such as Qatar and Kuwait as well. The bottom line, it has become the common conception around the globe that having oil resources means having power, and it is what the world is after, specifically the United States. Rentier states themselves function through this game of power influence. It further reinstates the fact that the weight of democracy or liberalization in these states is close to negligible. They are significantly bent towards authoritarianism (Luciani, 1987). There is hardly any political participation by locals in a rentier state (Anderson, 1987), which further indicates why the governments do not care for societal concerns or demands (Altunisik, 2014).

Limitations of a Rentier State and the Rentier State Theory

The rentier state theory, as seen above, aims to give a generalized, common framework that could fit in all the states that we know as rentier states. It tries to consolidate their similarities. We can also see from the literature presented above that rentier states have certain benefits and specific cons as well. As time has progressed and more research has surfaced, the rentier state theory has faced more criticism than applause. A prominent weakness in the theory is that it does not take into account, effectively, the differences between individual Middle Eastern countries (Altunisik, 1994).

Another problem with the theory is that it was based on previous studies and collection of histories.  It did not involve any quantitative or qualitative analysis of the earlier times or for the times to come. It also does not account for, of course, the changing climate of the world’s energy geopolitics. The advancements that were made in terms of technology got neglected as well. Scholars have also criticized the link between the theory and the concept of authoritarianism (Ohrulik,1999).  The logic behind taxation and distributive policies also remain ambiguous. They say that the two do not relate with each other unanimously (Altunisik, 2014). It should be noted that taxation has begun in some aspects, and increased in the rentier states.

These criticisms led to the need for the rethinking of the rentier theory model and to make some sound changes in it. First of all, new studies focused on including the effects of the individual state policies on their own political, and economic situation rather than considering them all as one. Via in-depth studies of these states separately, it was also revealed that they differed in terms of their oil-related histories, and social and political structures (Altunisik, 2014). Their historical accounts have greatly influenced the coalitions and social frameworks these states have formed over the years (Crystal, 1995). There also came an oil bust in the 1980s which did not go accounted for in the theory (Chaudry,1994). This downfall in prices of oil leads to the question of the sustainability of the rentier states. In times that the oil will not be sufficient to generate the expected and desired amount of revenue, what fiscal policies would these states need to adopt? It was a question of how the financial crisis would get controlled to maintain stability, which previously depended on the distribution of oil rents.

The economic conditions of rentier states deteriorated with the slump in oil prices. Since the states had not previously worked on other viable sources of revenue to meet the demands, they faced complications. There was a risk for social unrest as people would no longer be able to get the same chunk of oil rent, but the states could not afford this either because this would lead to their opposers and rivals to believe that the states’ power had been compromised. Sure enough, Saudi Arab and Libya weren’t able to successfully control the crisis. On the other hand, Kuwait, having well-organized business institutions as well, was able to handle the crisis effectively. In fact, for businesses in this gulf state, this was an opportunity to grow and develop further and restructure the economic framework of the country. It also brought political stability as the state now depended on these business elites for the power image in front of opposing groups (Karl, 1997). Similar events followed in Qatar as well despite a weaker business system initially.

The banking and financial sector of rentier states or Middle Eastern countries is also quite flawed. Once again, it is highly influenced by the state, and even private banks are discretely working as state-disguised institutions. Secondly, of course, the fluctuations in oil prices and the oil market directly impact the financial sector as well. The function of financial markets is to facilitate consumption and provide investment to businesses. Still, they do not assume this role at all in rentier states, which makes one question their existence in such an environment in the first place. All the handles of the financial sector are in the hands of the regime, and it has suffered from a severe lack of reform in comparison to the rest of the world (Creane et al., 2003). It shows a sustained disparity between the political economy and society, and it is also one of the main characteristics of a rentier state. They discourage reforms and liberalization since the state is adamant about safeguarding its own interests only.

Over the years leading to present times, the rentier theory has become limited mainly to the lack of democracy in the Middle Eastern states and their persistence towards authoritarianism. Even though the world has seen several waves of democratization, but Middle Eastern countries continue to resist it (Brynen, n.d.). It was stated by academics such as Michael Ross that that “the oil-impedes-democracy claim is both valid and statistically robust; oil does hurt democracy” (Ross, 2001). There was also stagnation in social growth, development, and modernization of the state. All these factors become a hindrance in the democratizing of a nation.

Conversely, some studies put forward the argument that the rentier states have wisely used the oil wealth for the betterment of the society and economy, and the criticisms made on their methods are exaggerated for the worse parts (Altunisik, 2014). Furthermore, Benjamin Smith (2004) also emphasized that even though Middle Eastern states faced economic and political shortcomings during oil price slumps, it did not shatter the overall survival of the states in the long term. However, these counter-arguments don’t do much to justify the incompetency of the rentier state theory.

The rentier state theory is also not sufficient to stand alone for all Arab or Middle Eastern countries. Countries such as Syria, Egypt, or Jordan simply do not fit in the same paradigm. While all Middle Eastern countries lack most natural resources, these three lack even oil. It means they do not benefit like other rentier states. Neither do they have that sort of wealth. And yet they maintain the same outlook towards how the state runs, meaning that other institutions, including democracy, are not developed. They want to keep the same kind of political and economic structure as their oil-rich neighbors (Malik, 2017).These countries are known as MENA economies, which stand for the Middle East and North Africa. They have faced war as well, which has led to further downfall in political and economic stability and growth (The World Bank, 2017).

The MENA states still, however, have been able to accumulate some revenue through three primary sources, which are “aid, remittances, and rents from government regulations” (Malik, 2017). They get foreign aid way more than other needy and low-income countries around the globe, which is peculiar. Even countries with sufficient oil resources such as Iran and Bahrain got to share foreign aid. It is suggested that this because of their strategic position. It shows how geopolitics is in play, which is beyond what rentier state theory can explain. These countries also have many expatriates working and earning.  The state receives a massive portion of its GDP via remittances from these expatriates. For example, Jordan and Lebanon’s 20% GDP consists of these remittances (Ahmad, 2012). Remittances help relieve some of the political pressures off of the government of these states, making them less concerned about the public and increasing unemployment (Malik, 2017). All this makes the relevance of the rentier state theory loom larger as a question mark.

Furthermore, remittances also play a part in slowing down long-term economic growth (Rajan and Subramanian, 2011). They act as a protective shield along with the incoming foreign aid, weakening the prospects for economic reforms. Last but not least, the third resource is government rents. All these states are centralized with their governments at the centre of everything, the same as all rentier states. It gives birth to monopolistic type of behaviour where prices are controlled and in hands of the government rather than the market. The states also place and face trade barriers, which further hinders economic growth. Furthermore, there is not much fiscal monitoring in these countries, and elites often abuse their influence to accumulate these rents (Malik, 2017).

From the above analysis, it can be seen that the rentier state theory that revolves around only one main component of the Middle Eastern countries, that is, oil, is not sufficient to explain the rest of the complexities these countries face. Many would disagree, that oil resource is the only lethal element to the political and economic growth of Middle Eastern countries. It is important to note that rich Middle Eastern states do not only have a market for oil but also a market for capital. They provide monetary funds and investments to foreign countries as a geopolitical measure, which helps them to sustain their image as being influential. They also finance the less-richer Middle Eastern states such as Egypt, Jordan, and Yemen as the last straw in these countries’ financial struggles.

Similarly, a lot of money also goes to military-related investments, since terrorist organizations in the Middle East are active, and this investment is on the rise. These terrorist groups present a threat to the rest of the world as well. Hence, the need for Middle Eastern states to have an authoritarian approach in the broader geopolitical framework arises (Malik, 2017). The rent system in the middle east is the main reason behind its lack of political and economic growth and reform, and it is, at the same time, challenging to remove as the people have become dependent and used-to it. The authoritarian regimes continue to last despite occasional pitfalls. A lot is at play here, as discussed earlier as well. Many elite and influential groups and coalitions that benefit fromMiddle Eastern methods, and they also play a role in the global geopolitics, would not want this framework to change.

When we look at the current times, we can also observe how some of the states that are so-called rentier or oil-dependent as part of the rentier state theory are not so much of that anymore. A highly applicable example of this is Dubai, which is the largest Emirate from the United Arab Emirates. This state has become one of the most popular tourist spots and a business hub. It is highly diversified, and much away from oil as a primary source of revenue for the economy. It is also highly developed and technologically well-equipped. The state authorities there promote privatization, and the rentier mindset has drastically decreased over there. Hence, this brings up the question of whether or not UAE qualifies as a pure rentier state and whether the rentier state theory is sufficient to describe its political conditions (Zicchieri, 2016). Herb (2005) presents further shortcomings in the theory as well. First of all, wealth in the rentier states is not only a result of oil-rents, as we see from the Dubai example, so it is wrong to assume that. So, wealth cannot be broadly framed to be responsible for the failure of the formation of democracy in Middle Eastern States.

Another significant observation is that the political structure of Middle Eastern states such as the UAE is highly influenced by their histories. The people have been used-to for hundreds of years to form tribal links and to have communal unities while being ruled by one ruler. It is not just a result of rentier-ism. The social constructs in these states have modernized over the years slowly to adjust, but they can still be linked back to their historical origins. Furthermore, the rentier state theory also does not include the domestic economy of the states and hence, also does not have space for the current non-rent economic changes and developments taking place over there. These developments are perhaps most prominent in the UAE, which is also working towards diversifying its economy and taking it away from oil dependency (Hvidt, 2013), promoting the private sector (Toledo, 2013). The rentier state theory ignores all these advancements. While many other Middle Eastern countries may not have reached the level of UAE and may seem to conform to the theory more, the argument still cannot be forgone because UAE is also a significant part of the Middle East.

The only thing the rentier theory focuses on, and deems responsible for the social, economic, and political conditions of the Middle Eastern countries, is oil-rents or other rents. It does not take into account the increased participation of foreign organizations in the policymaking processes and all the geopolitics that is involved. So, RST fails to provide reasoning’s for civil unrest, or its risks, in different states as it cannot explain geopolitical, foreign relations. RST also ignores merchants and business elites that are becoming increasingly influential in the Middle Eastern countries unlike before, making it no longer relevant and consistent with the recent changes in the political-economic structure.


Conclusively, it can be said that the rentier state theory is indeed not sufficient to explain the development and growth of the politics and economy in the Middle Eastern countries. While it may be relevant in the past because its entire premise is history and the states’ availability of oil as a source of revenue, in the present times, a lot more comes into play. Middle Eastern countries have evolved ever since the theory came into existence by a great deal. And The global paradigm of power is shifting as well, now more than ever and geopolitics plays a vital role in that. But the rentier state theory is not much concerned with geopolitics. While we do not have to discard the theory altogether, it is safe to say that its relevance has decreased significantly today and for the future. Beblawi (1987) noted that “there is no such thing as a pure rentier economy.”



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Belbin’s Theory on management applications





In Malaysia, government-linked companies (GLC) and multinational corporations (MNC) are different. In literature studies, it is found out that multinational corporations are not only reliable with a good reputation but also they are successful. On the other hand, GLCs are often indulged in fraudulent practices or mismanagement. The state-owned enterprises are considered as the leading providers of basic necessities such as utilities, postal, public transport, airports, sewerage, and construction.  The Malaysian GLCs make 5% of the total national workforce, which is also a 36% of the stock exchange market. This capitalization is worth 54% in Kuala Lumpur Index (Surbaini, K.N., 2018). The discussion provides that government-linked companies are significant in the Malaysian economy, so there should be intensive research in this regard.

GLCs are considered hybrid companies that can get financial returns only when they accomplish their social responsibilities—these small earlier public enterprises or government agencies that served social purposes. The privatization policy in Malaysia was introduced in the 1980s that was on the belief that it will drive government-based agencies to help them become cost-effective. Despite privatization, all the hold of government was maintained on GLCs. The government is a supreme body that can exercise its power to control all the activities, appoint senior management, as well as the board of directors. In addition to this, the decision making, strategy formulation, divestment, and acquisition-based decisions were also conducted by the government (Yazid, A.S., Hussin, M.R., and Daud, W.N.W., 2011).

Due to all these conditions, the financial performance of these companies was not favorable, so the government remained concerned about it. In Malaysia, it is also argued that GLCs are large, so there are main problems of strategic direction and internal control. The other arising issues are low productivity, high gearing ratio, handling of procurement, and less effective performance management systems. However, the dual objectives GLCs have to consider are the maximization of the return of shareholders. Rewarding and evaluating employees is also a big issue because there is a weak linkage in reward and performance. It is argued in studies that employees in GLCs are prone to inflate their accomplishments, while seniors are in a better position to use corporate ladder for their own benefits (Kumaran, V.V., Abdullah, H. and Hussin, F., 2015).

On the contrary, the MNCs in Malaysia are manufacturing firms that are based on import substitution production. The main areas linked to MNCs are chemicals, foods, and pharmaceuticals. After Vietnam and Thailand, Malaysia is the third favorite country for foreign direct investment. In MNCs, the export margin is high, so dramatic transformation was seen in 1970, and in the 1980s, the domestic market became a secondary manufacturing hub. Foreign direct investment has a strong role in any country’s economy. The MNCs in Malaysia is promoting domestic firms with this concept, so advanced technologies are better attracted under spin-off firms, subcontracting, and training and OEM activities. The government is providing significant support to MNCs to flourish and invite foreign direct investment by promoting the labor industry, quality investment, and provoking in discretionary authority. Multinational corporations are conducting business activities under franchise and joint venture setup (Lau, Y.W., 2013).

In Malaysia, multinational corporations from more than 60 countries are investing, and 182 international procurement centers are built. Germany, the US, Japan, are the leading countries that are interested in foreign direct investment. The electronics and manufacturing goods make most of the export. MNCs role to promote trade and international growth relations cannot be ignored. They also provide a significant incentive to the economy to establish subsidiaries that can give benefits in the long run (Issham, I., Fazilah, A.S.M., Hwa, 2008). Some crucial incentives are the taxation allowances, rights of ownership for investment, high tech industries involvement, and regional relationships that offer learning opportunities and enhance research and development activities. Government is a preeminent body that can practice its capacity to control all the exercises, choose senior administration, just as top managerial staff.

The environment for MNCs in Malaysia is conducive that allows for development and self-improvement for employees. The most crucial factor that promotes the growth of MNCs in an economy is the management of employees (Norhayati, M. and Siti‐Nabiha, A., 2009). Managing employee sand performance through reward and appraisal increases efficiency and retains them. If employees in any organization feel less encouraged and motivated, it directly impacts their productivity. The role of MNC in managing trade is also significant due to globalization. The focus of Malaysia on its MNCs is considerable in terms of managing incentives, giving them tax breaks, and maintaining employment prospects for people (Norhayati, M. and Siti‐Nabiha, A., 2009).

Part of the growth in MNCs is linked to the strategic roles that foreign factories perform, such as source factory, offshore factory, output, and contributory factory & lead factory. These factories focus on product development and life cycles. They also offer the saturated and fragmented market that is aligned on increased demand from customers, rapid process advancement, and technology-based dynamic situations. In Malaysia, MNCs are working as a powerful vehicle that is supporting production and capital based functions (Surbaini, K.N., 2018). These functions are not limited but extended to technical and managerial skills/knowledge across the globe. Diversity is also the critical element to consider in MNCs.

Since 2004, the Malaysian government has undertaken the initiatives to expand the scope of GLCs as per their competitors in the same regions. This program was known as the transformation of GLCs, and it was established to intensify the culture of commercial orientation. A committee known as Putrajaya High Performance worked in 2005 to follow this transformation program, so a quarterly report was set up to implement the government policies (Kumaran, V.V., Abdullah, H. and Hussin, F., 2015). Due to the GLC management, many restructuring processes were developed. The khazanah National Bhd was redeveloped, and composition initiatives under key performance indicators were introduced. GLCs in Malaysia have enhanced accountability structure and established divisional accounting.

The role of multinational companies in Malaysia is considered exploitative that is hostile to human rights and also devastating stablished communities. This process is linked to development, which is unfavorable for the local communities. GLCs are working under the strategic challenges of talent management to improve policies and practices regarding the virtual workplace, labor market, and diverse workforce. Tenaga Nasional Berhad in Malaysia is the largest utility company. The electricity company is most efficient and involved in the distribution, transmission, and generation of electricity with excellence. Taking this company as an example, the employees’ competencies in the company are enhanced and promoted under structural programs to improve efficiency (Tahir, W.M.M.W. and Sinnasamy, G., 2012).

To talk about multinational corporations in Malaysia, the foreign subsidiary is promoted by dual imperatives of the parent company. There is a growing trend of MNCs to leverage the best practices for organizations across their companies/subsidiaries so that organizational skills can be improved allover in the world. Some traditional literature assumes that corporate headquarters are responsible for the decision making aspects and foreign subsidiaries’ capabilities. Due to cultural differences, MNCs are facing issues in these companies yet joint ventures are also facing conflicting pressures. Moreover, the dynamic, methodology definition, divestment, and procurement based choices were additionally led by the government. Because of every one of these conditions, the money related execution of these organizations was not good so the government stayed worried about it. GLCs are involved in talent management activities to establish a competent workforce just according to the vision and mission of the company. It is argued that to revive the private investment, the government has to consider policy and investment plans to management talent (Wahab, S.N.A.A. and Ramli, N.A., 2013). To achieve talent management expertise, the government has to introduce divestment plans, but GLCs in Malaysia are facing issues regarding the acquisition of finance and property developers. GLCs are crowding out the options of investment, yet no empirical evidence is supporting it. The role of GLCs cannot be ignored for the development of the economy because they have a commercial objective and also involve in management position, financing, restructuring, and contract awards. These companies and affiliate subsidiaries are promoting development. Most of these GLCs are associated with banking, communication, agriculture, and retail trade so there is strategic involvement. In Malaysia, it is likewise contended that GLCs are huge in size, so there are primary issues of key heading and central control. The remote direct venture has a stable job in any nation’s economy (Yazid, A.S., Hussin, M.R. and Daud, W.N.W., 2011).

The intra-firm organizational network is aligned on MNCs while its main categories are autonomous, active, receptive, and quiescent subsidiaries. The responsive industries are integrated ones while MNC’s operations hold little power when related to local markets. The autonomous subsidiaries are not so much integrated with MNC’s services and networking. The MNCs in Malaysia are advancing local firms with this idea, so trend-setting innovations are better pulled in underside project firms, subcontracting, and preparing and related exercises. Both MNC and GLCs are significant for the economic development of Malaysia.


Issham, I., Fazilah, A.S.M., Hwa, Y.S., Kamil, A.A., Ayub, A.A. and Ayub, M.A., 2008. Economic value added (eva) as a performance measurement for glcs vs non-glcs: evidence from bursa malaysia. Prague Economic Papers, 17(2), pp.168–179.

Kumaran, V.V., Abdullah, H. and Hussin, F., 2015. Growth Slowdowns and Role of Government Linked Companies (GLCs) in Malaysia. Advanced Science Letters, 21(6), pp.2073–2076.

Lau, Y.W., 2013. Government-linked companies (GLCs) performance – a structuration perspective: Malaysian evidence. International Journal of Critical Accounting, 5(2), p.213.

Norhayati, M. and Siti‐Nabiha, A., 2009. A case study of the performance management system in a Malaysian government linked company. Journal of Accounting & Organizational Change, 5(2), pp.243–276.

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Tahir, W.M.M.W. and Sinnasamy, G., 2012. Dividend policy: Evidence of Government-Linked Companies (GLCs). 2012 International Conference on Innovation Management and Technology Research.

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Yazid, A.S., Hussin, M.R. and Daud, W.N.W., 2011. An Examination of Enterprise Risk Management (ERM) Practices among the Government-Linked Companies (GLCs) in Malaysia. International Business Research, 4(4).



GCC and Migration

An upheaval in GCC economies was seen during the late1970s, which was followed by a government-funded building spree, employing multinational companies to build urban infrastructure, airports, highways, and private housing. Most of the workers that these economies employed on first wave-construction projects used to live on the building sites. Migrants that returned home after working in GCC countries revealed the opportunities of working in GCC countries, and soon there was an influx of job seekers with millions of people looking for better opportunities. Despite the arid weather and poor working conditions, migrant workers flocked to the Middle East because of high wages which were at times three to ten times higher than what workers earned at home (Tallleister, 2013). 

Migration Control

The sustainability of a country comes under pressure during the period of raging population growth as the resources can become scarce by trying to accommodate the needs as well as demands of the population. In these circumstances, demography correlates well with the policies of the state. Rapid labor force growth, as well as high oil prices, happen to be two dominant factors that contribute towards driving change in migration policies across GCC countries(Shediac & Samman, 2010). GCC countries strive to control migration following the example of the company Saudi Oger that laid off about ten thousand Indian workers who had not been paid for seven straight months, which prompted the Indian consulate to provide food camps. Saudi Aramco also cancelled as well as the delayed majority of its projects because of low oil prices (Mueller, 2006). 

Nationalization programs are also widely used to reduce the number of expats in the GCC for example, the Saudi government plans on implementing the National Transformation Program that will reduce the employment of migrant workers in private as well as a public sector by 2020(Martin, 2017). The Saudi government plans to control migration through its Saudization or Nitaqat policy, which requires that all businesses have at least a 10% quota for Saudi Nationals(Peck, 2017). To further control migration, the Saudi government imposed the rule to shut down the private firms that did not hire Saudi nationals. The government also made sure that specific sectors were off-limits to migrant workers (Peck, 2017).

According to Martin (2017) some GCC countries might even impose income tax on migrant workers to make it rather expensive for them to work in the GCC countries. WhileJureidini (2019)asserts that the “Qatarization” or “Emiratization” is the policies by the Gulf States that indigenize the workforce in the market while reducing the dependency on migrant workers. Migration happens to be a fundamentally critical issue across the Gulf because the foreign population in GCC outnumbers the local population by 51 percent(Jason, 2017). While states like Saudi Arabia have imposed policies to manage the migration and influx of workers over the years, other states, like the UAE and Qatar, have not yet imposed such policies (Jason, 2017). 

Countries like Saudi Arabia, Qatar and the UAE, which have some of the highest number of expatriate migrant workers have imposed some drastic initiatives to control migration.

The government of Bahrain also kept visa trafficking in check and imposed severe regulations on entry to Bahrain. Gulf states like Bahrain have imposed high costs of hiring domestic workers from foreign markets. Another way migration can be controlled isthrough the imposition of limited quotas for firms that hire migrant workers (Fargues, 2006). For example, Kuwait has imposed a 35% quota for foreign workers in the government sector; meanwhile, the banking sector in UAE has also reserved the majority of the jobs for nationals. The strategy of taxing remittances will aid the GCC governments hit high with the decline of oil as well as gas prices as this strategy will target the remittance of migrant workers(Fargues, 2006).

The migrants are present in the GCC because there are employment opportunities, there are jobs that need to be filled, and there are not enough GCC nationals to fill these positions. Which is the reason why migrant workers come to work and live in the GCC. The reliance of migrant workers and the GCC countries is mutual. However, if the governments of the GCC want to control migration, they can implement several strategies. First, they can set quotas on the number of visas that are issued. This is a widely used tactic that has been used by many countries in the GCC to control migration. to individuals with the work related qualifications (Jureidini, 2017).The government of Bahrain also kept visa trafficking in check and imposed severe regulations on entry to Bahrain. Gulf states like Bahrain have imposed high costs of hiring domestic workers from foreign markets. Another way migration can be controlled isthrough the imposition of limited quotas for firms that hire migrant workers (Fargues, 2006). For example, Kuwait has imposed a 35% quota for foreign workers in the government sector; meanwhile, the banking sector in UAE has also reserved the majority of the jobs for nationals.

They can also increase taxes, which can discourage migrant workers from coming to the GCC. Although GCC countries do not have a policy regarding income taxes, however, UAE, as well as other countries in the GCC, have considered imposing a tax on foreign the remittance of foreign workers for raising revenues, which range from 3% in Oman to 5% in Kuwait. Abbott states that to control migration, UAE has raised taxes on all of the residents through value-added tax ranging from 3 to 5 percent, which will generate about three billion dollars (Abbott, 2019). The governments can also control migration by reforming their internal mobility laws. For example, Minister Resolution 764 has allowed foreign workers to switch their jobs continuously, which means that the transfer of knowledge and skills from one organization to the other will expandStricter work visa requirements can also be implemented such as requiring the qualifications to match the job position.

Security implications 

The security implications such as environmental, societal, economic, political, and military stem from enhanced migration, which has the potential to amplify security concerns. This happens to be the main reason why migration trends, especially high migration towards a country has become a matter of immense international as well as domestic politics. For example, the increase of anti-immigrant policies leads to changes in laws by which a country is governed, as well as on the perception of the recruiters (Fargues, 2006). The correlation between security and migration, according to Jason, is challenging because security and migration are subjective concepts that are dependent on benefits (Jason, 2017). Governments these days wish to control the number of individuals passing through their territory, and their inability to do so forges a threat to national security.

Thus the increase in population through migration might further induce the to provide economic as well as social opportunities and services to their citizens that might, in turn, enhance threat to political regimes (Jureidini, 2019). This kind of political threats reduce a state’s organizational stability, in this sense, when the receiving states and the migrants have the same ideology, the ideology of the host country might pose as a threat to the home country of the migrants. On the other hand, when the ideology of migrants is different from that of the receiving state, then they might pose a serious threat to the stability of the receiving state (Perthes, 2015).

A case can certainly be made that migration can cause security implications for Gulf states by patterns of transnational crime such as human trafficking as well as smuggling, especially when children, as well as women, are involved.  (Abbott, 2019).

As the number of migrant labor increases, the risks to security also increase. There are different types of securities that are associated with a country and impacted by influx of migrant workers. Security such as health security, physical security, border security, food security, environmental security. One example can be seen from the recent coronavirus pandemic, as the health security systems of the country are occupied and strained due to the focus on migrant workers who are infected with the virus. Physical security of people is also threatened with the flux of labor, as it becomes increasingly difficult to manage large numbers of people, therefore creating strain on the existing resources.

Language, identity, and culture: a security concern

Language, identity, and culture can be a security concern for the Gulf states in the sense that if societal security is taken as a sustainable pattern of ethnic and religious identity as well as custom, then the state-building process often aims at homogenizing the social identities of its citizens(Martin, 2017). Since cultural, religion, and language traditions happen to play their role in the general ideology of a state, they need to be protected as well as defended against the ideological, language, cultural imports from other states such as through the import of migrants (Martin, 2017). Thus for Middle Eastern countries, such as Iraq and Lebanon, that have to address religious as well as ethical issues in their nation-building process, trends in demography and population may aggravate societal as well as domestic threats to security. For example, the enhancement in population due to immigration might impact in a favorable manner an “unwanted” religious or ethnic community. Therefore, the patterns of the population might be a threat to national security in terms of language, culture, and religion. This happens to be the main reason why the Iraqi, as well as the Lebanese government, do not provide statistics about the composition of their population (Diamond, 2010). 

When considering the long term implications of migration, it is immensely important to note that the creation of ethnic minorities within host countries happens to be the top concern for the receiving state. Receiving migrants within the country has a long-lasting social impact, specifically on language and cultural demographics (Myron, 1992). This is because it might turn homogenous societies into multicultural as well as multi-ethnic societies. An immense influx of migration can also cause a rise in societal concerns since they can be seen threatening the ideology of the nation-state due to differences in culture, religion, and language. Migrants are also perceived as being a challenge to the traditional meaning of citizenship as well as the duties and rights of the citizens to the nations. 

It has been established that the migration has a substantial impact on the idealized homogeneity of a state as most countries. This is why migrants are a threat to the value systems and cultural norms of the receiving states. In terms of Gulf states, anti-immigrant and xenophobia enhances in times of unemployment and recession. Toleration to the cultural norms of other states reduces and leads to resentment within the citizens, which might lead to rebellion against the policies of the government (Ulrichsen, 2017). 

Jureidini argues that among the social issues that Middle Eastern countries face, one major complication is the cultural conflict between Western immigrants and the nationals (Jureidini, 2019). The western migration contributes towards the workforce much needed for service and manufacturing industries. However, the demographic change due to immigrant communities poses issues for policymakers for the receiving country (Valenta, 2016). 

Immigrant communities are seen as an additional cost on the service and infrastructural provision and pose an immense threat to the identity as well as national culture by altering the religious, linguistic, cultural, and ethnic components of the population of the host country. Economics is also a subject of imperative importance when migration is considered (Colombo, 2016). Even when a specific country willingly accepts the immigrants, the impact of such a move on the economy cannot be undermined. This is because immigration policies can have various impacts, such as recession or unemployment.

Bel-Air states that in recent years the topic of language, identity, and culture as a security concern for the Gulf states has taken on a rather sensitive political side. This is because the dependence of the migrant workers, as well as their penetration into the Gulf life, has led to the government and many media outlets to frame the issue as that of basic cultural threat and security (Bel-Air, 2018).Migration has become a major reason for populist surge in the host countries and the rise of nationalism leads to anti-immigration policies. These policies are often based on the projected as well as perceived negative influences that migrants pose a threat to the culture.Ideal examples of this can be seen in the West, where nationalists have opposed immigrants so much that they have resulted in terrorist attacks, such as the Christchurch Mosque shootings in which the individuals affected by the extreme act of violence were migrant and refugee communities.The white supremacist and extreme nationalist politics appeared to be at the core of the attack on the Muslim community in New Zealand.

The Countries are initiating heritage projects across the GCC to preserve culture, traditions and identity For example,  Katara is a heritage project, Similarly Souq Waqif also serves as a solution to address security concerns related to nationalists and fear of losing the culture and traditions.

In the GCC there is a very real possibility that the influx of migrant workers can result in significant opposition from nationalists. There is a possibility that this can even result in region wide disputes. Nationalists in the GCC countries can also potentially take to the government to oppose the influx of migrants. MIn this sense, when the receiving states and the migrants have the same ideology, the ideology of the host country might pose as a threat to the home country of the migrants. On the other hand, when the ideology of migrants is different from that of the receiving state, then they might pose a serious threat to the stability of the receiving state (Perthes, 2015).

The rise of surveillance in the Gulf

The rapidly increasing crime rate as well as incidents of data thefts, growth of infrastructure, rising initiatives of IT spending by the government and enhanced security spending is boosting the growth of surveillance and security systems in the Gulf States.Government initiatives such as Dubai Vision 2021, Qatar National Vision 2030, and Saudi Vision 2030 are predicted to enhance the economic growth of many states in the Gulf region. This economic boom and development of infrastructure creates more avenues for surveillance and deployment of security systems.

There has been an increase in surveillance in the Gulf states where officials have voiced their pride in their ability to gather huge amount of data on migrant and foreign workforce present within their territory.Given the rapid changes that have taken place in recent years, as well as the inherent issues that come with an increase in population from different parts of the world, has resulted in rapid increase in government surveillance in the GCC.

The increase in crimes, terrorist activities combined with the advances in technology have made the GCC vulnerable for wrong activities. This has forced governments to increase surveillance to keep check on the people and ensure GCC continues to be known as the safest part of the world. Moreover, Africa is the main region where women, as well as young girls, are trafficked from war zones to the Gulf countries. According to the International Organization for Migration, human trafficking takes place from Ghana to Libya and Lebanon, where the domestic service is transferred to Saudi Arabia as well as Kuwait. Human trafficking from South Asia to the Gulf states is considered a serious issue within the region as the region has become the transit point. Young boys have particularly trafficked for dangerous as well as the violent pursuit of camel racing that hasbeen documented within Qatar(Martin, 2017). Also, extensive trafficking of children from Sudan, South Asia, Bangladesh, Yemen, Eritrea is noted for begging rings specifically in Saudi Arabia

In the Gulf states, the surveillance policy is less restrictive and less coercive. InQatar, the non-citizen residents are aware thatthe moment they set foot in the soil that their time in Qatar is bound and dependent on their work as well as the fact that their stake in the society is rather limited The Gulf states like Qatar often come under scrutiny for migrant worker policy in regards to the lack of full equality norms for migrant workers.


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