Study Of The Financial System In The Middle East International Political Economy

Despite the fact that the financial sector of the Middle East still remains many problems, it may be considered the most mature sector compared to other economic sectors such as the industrial and agricultural sectors. The role of the Middle East finance on international financial markes has been recognised with its increasing linkages with politics, religion and economy. Meanwhile, more researches have been focusing on the Middle East financial development.This dissertation is about the financial development of the Midde East based on International Political Economy . From the research starting point of the development and the problems within the process of changes based on New Institutional Financial Theory(NIF), this dissertation believes that institutions are the key factors to the development of Middle East finance. It summarizes the effects of five factors such as geopolotics, petro-dollar, religion, business cultural environment and financial globalization on Middle East Financial process; then gives some advices on creating sound financial system as well as its future development.This dissertation is composed of the introduction and eight chapters.The introduction mainly puts forward the reasons and illuminates the significance of studying Middle East financial system development, rounds up and combs the research status quo the domestic and foreign scholars have accumulated around this theme, and makes certain comments on it. The introduction also makes a brief explanation of the research train of the thoughts, the basic logic, the research methods, the frame of the content, and the main initiatives of the paper.Chapter one: Overview of Middle East financial development. This part elucidates the process of financial changes based on four stages, that is emerging period before 1973, prototype building period of 1973-1980s, deepen times of 1990s and the second rising since 2000. It puts emphasis on the problems in the process of Middle East financial development, and extends to the reasons of the problems, which is the core of the dissertation. Investigating and exploring these issues and changes is also the logic starting point of researching the factors concerning Middle East financial development.Chapter two: geopolitics background of Middle East. This part illustrates the nexus of oil and geopolitics, and it believes it is oil battle from advanced states especially the United States of America that leads to the turbulence and unrest in the Middle East. Then it studies the dispute between Arab Nationalism and Pan-Islamism and its promoting role on the emergence of Islamic banking. West states always denounce islamic finance for"Islam Threat",and international war on financial terrorism declared by west states since"9·11" has negative effects on islamic banks and islamic charity. Finally it concludes that peace and stability is a prerequisite for sustainable economic and financial development through analyzing the influences of main wars on Middle East economy.Chapter three: promoting role of petro-dollar on Middle East financial system. This part firstly studies the nexus between oil and Middle East economy, pointing that it is the dependence on oil that leads to the volatility of Middle East economy, and oil price fluctuation is much related to the financialization of international oil market. Then it elaborates the petro-dollar recycling in 1970s-1980s and 2000s, indicate that petro-dollar is no only helpful to global financial stability but also conducive to assets bubble. It also puts emphasis on the role of petro-dollar on Middle East finance, and concludes that petro-dollar prosperity increases bank liquidity, drives strong credit growth, enhances capital market, inspires the initiative of building financial centre, and transforms from oil capital to financial capital.Chapter four: Islamic features of Middle East financial system. This part begins with analyzing Islamic economic theory and Islamic financial theory, pointing that Islamic finance is combination which applies Islam to modern economy. Then it reviews the causes of the emergence and global development of Islamic finance, and figures out the dominant role of Islamic renaissance movement and huge petro-dollar. This part also compares Islamic finance and traditional finance, pointing that the former is the supplement to the latter. Finally, it investigates the connection between Islamic finance and domestic politics, concludes that the extent of Islamic finance is greatly related to governments'attitudes, that is, more supporting from government, more development of Islamic finance.Chapter five: special business cultural environment of the Middle East. This part discusses the political system, legal system, traditional social culture and business culture, technology information, and market competitive environment in the Middle East countries. It has proclaimed and implemented many reform plans; however the outcomes are still limited, scattered and not comprehensive in any of the Middle East states. There still remain many problems to be settled for lacking of vitality and competitiveness, which leads to higher transactional costs, less competence of firms and industries, less attractive to foreign investment inflows and international credits, and less accessible to credits from domestic financial institution.Chapter six: role of financial globalization on Middle East financial system. This part elaborately analyzes the fundamental nature of financial globalization and liberalization, liberalization process of Middle East Arab countries, and effects of international financial crisis on Middle East finance. It points that financial globalization with the basis of Neo- Liberalism is actually the globalization of financial capital, so it still means monopolization. With advanced countries dominating financial liberalization of developing countries, it also leads to financial risk and crisis, due to absence of relevant institutional support. Arab financial liberalization process includes reforms of monetary policy, banking sector and capital market, which brings comparative low risk thanks to its gradual process. Nevertheless, any country could be immune from globalization; Middle East financial system suffers some effects from international financial crisis although not a destructive hit.Chapter seven: emerging financial assets:Sovereign Wealth Funds-SWFs. This part is case study of the dissertation, studying of if is due to the high concerning of the international community since international financial crisis. This part reviews the development, features of SWFs and changes after financial crisis, pointing out that as an emerging force of international financial market, it suffers the questioning of political purpose from west world owing to its sovereign feature, cross-border investment and low transparency. In fact the essential argument is about the dominance of international financial system, which is the root of financial protectionism from west countries. This part also analyzes the changes of SWFs of Middle East Gulf countries, indicating that SWFs is new financial assets from oil wealth.Chapter eight: some thoughts on the development of Middle East finance. Firstly it concludes Middle East financial development is the interaction of a variety of factors, with different performance at different times and different countries, and we couldn't generally say which is the main facot or a secondary one. Then it points that there is a structural disconnect between finance and real economy by combing the relationship between financial development and economic growth, however the reasons causing this vary. This part finally propounds the assumption of the future of Middle East financial development in Post-crisis era, that is, financial changes should be government-led with market demand supplemented, and financial sector should take initiative to open with moderate freedom and strengthen the regulation and supervision, and respond the challenges of globalization with regional integration in order to gradually move closer to the centre and to find a new place in the new international political and economic order.