Towards a unified system of Zakat accounting: the case of the

Towards a unified system of
Zakat accounting: the case of the
GCC countries

A thesis submitted for the degree
Philosophy
Doctor
of
of
Cardiff University

by

Abdullah

Cardiff

TM

Al-Utaibi

Business School

Cardiff University
1999

DECLARATION

has

This
work
any degree
candidature

Signed-----------

-I-q. --=------

is

the

result
stated.
references.

otherwise
explicit

Signed----------

-

,
IL

26-/

STATEMENT

2

hereby

give
for

I

- student)

1

thesis

Date----

Al-Utaibi

for

T

LLII

STATEMENT

where
giving

in substance
accepted
in
concurrently
submitted

--------(Abdullah

Date ---ýý-ý

This

been

not previously
and is not being
for
any degree

available
the
title

and

of my own investigations,
except
Other
acknowledged
sources

are
is
A bibliography
appended.

-------(Abdullah

Al-Utaibi

- student)

-Lci-`1-4-------

consent
photocopy
summary

for

if

to be
my thesis,
accepted,
inter-library
loan,
and for
and
to be made available
to outside

for

organisations.

Signed--Date----2-6

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-------(Abdullah
-------

1

Al-Utaibi

- student)

ACKNOWLEDGEMENTS

IN THE NAME OF ALLAH, MOST GRACIOUS, MOST MERCIFUL
I AM THANKFUL TO ALMIGHTY ALLAH FOR HIS GUIDANCE AND BLESSING
ON THE SUCCESS OF MY EFFORTS DURING THE COURSE OF THIS STUDY.

Then

of

I

very

special

a valuable
I

Kamal

friendly

owe
Naser

Cardiff.

to

the

Saleh

sustained

Dr.

Al-Sharif

and

my

thesis.

business

school.

Thirdly,

I
her

would

love,

to

to

as well

the

as

University
due

the

head

of

the

Al-Khyal,

Dr.

Abdulmajed
Ahmmad

Al-Khshram,
for

the
in

the

generous
preparation

librarians

at

to

my gratitude

encouragement,

11

supervisor

Tawfeek

Mr.

provided
all

emphasis
and

made

University.

Ammar

advice
go

have

are

and

Al-Khateb

and

a number

gratitude

Al-Taweel,

Younis,

Thanks

prayers

to

Ibrahim

khalid

like

and

Cardiff

goes

Yahya

at

directors

my
help

study

thanks

Section,

also

to

interest,
my

special

Finance

who

gratitude

during

ideas

encouragement,

of

deputy

to

thesis.

for

his

thanks

organisations

this

debt

AlMahmoud,

Abdulgani,

for

to

director,
and

and

a major

appreciation

Mr.

of

individuals

Secondly,

Accounting

my deepest

express

encouragement,

of

My

to

contribution

Firstly,
Dr.

like

would

and

the

my mother
to

all

my

family

back

members

Very

understanding.
here

family
for

her

sacrifice,

Renad

for

the

Finally,
study

gratitude

my

for

little

not
ways

to

those

along

with

for

Cardiff,

their

having

had

they
who
have

efforts.

iii

due

and

patience
to

my

beloved

my wife,

Am Abdullaziz,

understanding;

to

Wadaha,

my full

individuals
I

are

Ohoud,

which

whom

support,

to
and

daughters

in

their
thanks

patience

and

and

for

special

me in

with

Abdullaziz

home

my

Basimah,

attention

as

son
Ruba

well

as

helped.
have

contributed

inadvertently

to
omitted

this
my

PAGINATION
ORIGINAL

ERROR
THESIS

IN

Abstract
The possibility
Zakat,
of
one
first
examined

establishing
of
the
pillars
by
investigating

for
accounting
system
is
faith
the
Islamic
of
the
the
relevance
of
Gulf
Co-operative
the
of
introducing
a unified
system
an

socio-economic
environment
(GCC)
Council
to
countries
for
Zakat.
Having
this
the
achieved
general
aim,
study
develop
to
attempts,
secondly,
an
accounting
system
different
the
Zakat
serving
processes
of
estimation,
distribution.
Employing
the
calculation,
collection
and
fundamental
financial
both
the
principles
accounting,
of
by designing
aims
and
objectives
served
a research
were
distributed
four
to
questionnaire
groups
of
people
by occupation
in
four
the
Gulf
States.
classified
six
of
These
Bahrain,
Kuwait,
Saudi
Arabia
countries
are
and the
United
Arab
Emirates.
A sample
159
respondents
of
was
the
GCC
the
selected
of
as
representative
societies
of
countries.

The results
that
the environment
of the analysis
revealed
is
the
Gulf
States
to
the
of
prepared
relevant
adopt
for
Based
the
on
arrangements
a Zakat
organisation.
Saudi
the
Arabia,
the
study
experience
reveals
of
issues
in imposing
in the
the duty
problematic
of Zakat
is a
States.
that
Gulf
The study
there
other
also
reports
to
real
need
establish
an accounting
system
which
will
Respondents
to the multi-functions
respond
were
of Zakat.
in organising
for
eager
role
a distinctive
governmental
have
both
the
the
whole
processes,
as
governments
liability
implement
to
compulsory
religious
and
power
legislation.
Zakat
An efficient
the
of calculating
system
Zakat
to
the
requires
amount
needy
some
of
payable
in financial
adjustment
reports
and disclosure.

V

Contents
Page
i

Declaration
Dedication
Acknowledgements
Abstract
Contents
List
of
Glossary

ii
iii
v
vi
xii
xiv

tables
terms

of

Chapter
one
Introduction
1

1.0

Introduction

1.1
1.2

Objectives
Methodology

1.3

Limitations
Organisation

1.4

Chapter
General

the

of

6

7

two
background

to

2.1.1.2

Social,

2.1.2
2.1.2.1

Kuwait
Economic

2.1.2.2

Social,

2.1.3
2.1.3.1

(SA)
Saudi
Arabia
background
Economic

2.1.3.2

Social,

2.1.4

The

2.1.4.1

Economic

2.1.4.2

Social,

2.1.5
2.1.6
2.2

Oman
Qatar
Aggregate

2.3

structure
Co-operation

Co-operation

Council

es
(GCC)

background

Cultural

and political

background

Cultural

and political

background

Cultural

and political

background

Arab

Emirates

.-

An example

(UAE)

21

26
28

28

and political

background

economic
analysis
of the
V
of GCC countries
in the GCC states

of

18

22
24

background

Cultural

11
12
13
14
19
20

background

United

Summary

GCC stat

the

Introduction
The Gulf
Bahrain
Economic

2.5

/

study
of the
thesis
of the

2.0
2.1
2.1.1
2.1.1.1

2.4

4
5

study

Zakat

regulation

vi

31
32
34

4

35
42
50

Chapter

three

Principles

Islamic

of

economics
52

3.0

Introduction

3.1

Islamic

dimensions

3.2

Islamic

economics

3.3

Principles

3.4
3.4.1
3.4.2
3.4.3

Goals
of Islamic
Economic
wellbeing
justice
Social
justice
Economic

3.4.4
3.4.5
3.5

Equitable
Freedom
Islamic

3.5.1

Definition
of
its
prohibition

riba
in

behind

the

of

Reasons

3.5.3
3.6

Types
Islamic

of

3.7

Islam

3.8
3.9
3.10

and

Economic
Islamic
Summary

Zakat

the

54

study

59

and brotherhood

unity

63
64
65
67
68

economics

of income
and activity
of riba

distribution
of ownership
prohibition

3.5.2

Chapte

to

for
and reasons
Islamic
economics

and

economic

by

in

75

riba

78
79
80

ethics

problems

intervention

economic

of

prohibition

riba
economics

70
72
74

86
the

87
92
95

state

practice

four

r
and

its

in

position

Islam
99
101
103
103

4.0
4.1
4.1.1
4.1.1.1

Introduction
Principles
Goals
of
Religious

4.1.1.2

Social

4.1.1.3
4.2

Economic
goals
Beneficiaries

4.3

Entities

4.3.1
4.3.2
4.3.2.1
4.3.2.2
4.3.2.3
4.3.2.4

Entities
Wealth
Complete
ownership
Actual
or ability
growth
Ownership
of a specified
The passage
of a year

4.4

Zakat

4.4.1

on capital

Zakat

on

of
Zakat

Zakat

goals

104

goals

of

Zakat

subject

and wealth

animal

104
105

and
wealth

vi'

to

Zakat

to grow
level
of

its

proceeds

wealth

108
108
111
111
114
115
116

116
116

4.4.1.1
4.4.1.2
4.4.2
4.4.2.1
4.4.2.2
4.4.2.3

Zakat
on
Situations
Zakat
on
Zakat
on
Zakat
on
Zakat
on

4.4.3
4.4.4
4.4.4.1

Zakat pool
of cash and near cash
Zakat
produce
on agricultural
Types of agricultural
produce
to Zakat
subject
Starting
of Zakat duty
point

4.4.4.2

animals
observed
cash
and near
cash
gold
and silver
paper
money
stocks
and securities

Zakat

4.4.4.3

Amount

4.4.5

Zakat

4.4.5.1
4.4.5.2
4.4.5.3

and professions
Zakat
on personal
Zakat
on minerals
Zakat
on catches

4.5

Department
Department

from

from

4.6

produce

the

sea

for

-4.6.4.1
4.6.4.2
4.7

129
129
129
131
132

the
133

Zakat
and Income
General
Income

134
136

the

Classification
assets
of commercial
Current
assets
Cash and debtors
Stock
from
Liabilities
current
assets
arising
base
Calculating
the
Zakat
Direct
method
Indirect
method
Summary

4.6.1
4.6.2
4.6.2.1
4.6.2.2
4.6.3
4.6.4

123
125
126
128

income

for
Authority
responsible
distribution
of Zakat
Zakat
of trade
on assets

4.5.3

items

labour

responsible
of Zakat
of
of

assets

agricultural

on

income
on

Authorities
collection

4.5.1
4.5.2

u know

of

117
117
119
119
120
122

pastoral
to be

136
137
140
141
141
142
144
145
145
146
149

my home phone

Chapter

five

Research

methodology

5.0

Introduction

153

5.1
5.2
5.2.1
5.2.2
5.2.3

Study
objectives
Research
questions
Zakat
payment
Compulsory
nature
Zakat
accounting

154
155
155
156
158

of

VIII

Zakat

160
161
162

5.2.4
5.2.5
5.2.6

Zakat
Zakat
Zakat

5.2.7

Possibility

5.2.8
5.2.9
5.2.9.1
5.2.9.2
5.2.9.3
5.2.9.4
5.2.9.5
5.2.9.6
5.2.8.7
5.2.9.8
5.2.10
5.2.11
5.2.12
5.2.13
5.2.14

Zakat
collection
and distribution
in accounting
Variations
measurement
Depreciation
of fixed
assets
Allowances
and reserves
Expenditure
to previous
Expenditure
relating
years
items
Wages,
and similar
salaries
End of service
awards
Bad debts
board
Fees of firm's
of directors
Percentage
of Zakat
Shariah
committee
supervisory
in the annual
location
Zakat
report
Zakat
method
implementation
Benefit
of Zakat

165
167
167
169
170
170
171
171
172
173
175
176
177
177
179

5.3

Research

183

5.3.1
5.3.2
5.3.3
5.3.4
5.3.5
5.4
5.4.1
5.4.2
5.5

Questionnaire
method
Design
questionnaire
of the
Pilot
study
distribution
Sample
and questionnaire
Questionnaire
rate
response
Statistical
analysis
Descriptive
statistics
Statistical
tests
Summary

Chapter
Statistical
6.0
6.1
6.1.1
6.2
6.2.1
6.2.2
6.2.3
6.2.4

auditing
regulation
measurement

of

disclosure

and

Zakat

harmonisation

163

methodology

183
187
189
190
194
196
196
198
200

six
analysis

the

of

survey

study

Introduction
Personal
characteristics
of respondents
Investments
and their
values
Major
results
Zakat
returns?
payment
on investment
Factors
the paying
obstructing
to the government
of Zakat
Collection
of Zakat
distribute
Zakat?
Who should

ix

201
201
206
208
208
208
214
219

6.2.5
6.2.6

The percentage
be paid
should

Zakat

of

222

Satisfaction

with

to

Zakat

calculate

for

6.3

Accounting

6.3.1

The placement

that

methods

used

226
229

Zakat

of

in

Zakat

annual

6.3.2
6.3.3
6.3.4
6.4

Auditing
of Zakat
Zakat
regulation
in Zakat
Variations
evaluation
Proposed
recommendations

6.4.1

Reasons behind
the low level
of Zakat
collection
Appointment
of Sharia
supervisory

6.4.2

reports

benefits

Potential

from

244

Zakat
248

Implementation

for

6.4.4

Possibility

6.5

harmonisation
Summary

Chapter

233
236
238
241

241

committee

6.4.3

229

importance

and

of

Zakat
252
256

seven

Summaries,

conclusion

and

recommendations
258
258
258
259
259
261
262

7.0
7.1
7.1.1
7.1.2
7.1.3
7.1.4
7.1.5

Introduction
Summary
Chapter
Chapter
Chapter
Chapter
Chapter

of the
one
two
three
four
five

7.1.6

Chapter

six

7.2
7.3
7.3.1

from
Main
the
conclusions
study
future
for
Recommendation
research
Reconciling
measurement
accountancy

266
273

274

7.3.1.1

and Zakat base
Working
capital
of

the

thesis

262

the

at

beginning
275

period

7.3.1.2
7.3.2

during
Net profit
achieved
for
Recommended treatments

7.3.2.1

Expenditure
Depreciation

7.3.2.2

Allowances

7.3.2.3

Previous

of

fixed

assets

the period
some

277
279
280
281

year's

expenditure

X

281

fee

7.3.3

Academic

7.3.4
7.4

to employees
Amount
of Zakat
collected
Further
recommendations

expenditure

Bibliography

paid
by

institution

282
282
283

xvi

Appendix
"
"
"

letter;
of questionnaire
and covering
versions
letter;
introductory
and explanatory
and,
supervisor's
(Department
Zakat
Regulations
and Income).
of Zakat

Arabic/English

xi

List

of

tables
Page

Table 2.1

Economic indicators of the GCC countries

36

Table 2.2

Change of percentage in economic indicators of the GCC countries

37

Table 5.1

Questionnaire response rate

194

Table 6.1(a)

background characteristics of the respondents

203

Table 6.1(b)

Occupation and experience of the respondents

205

Table 6.2

Respondents' investments and their values

206

Table 6.3

Zakat payment and its enforcement

208

Table 6.4(a)

Reasons behind not paying Zakat

210

Table 6.4(b)

Reasons behind not paying Zakat

212

Table 6.5(a)

Who should collect Zakat

215

Table 6.5(b)

Who should collect Zakat

217

Table 6.6(a)

Who should distribute Zakat?

220

Table 6.6(b)

Who should distribute Zakat?

221

Table 6.7(a)

Percentage of Zakat that should be paid

223

Table 6.7(b)

Percentage of Zakat that should be paid

225

Table 6.8(a)

Degree of satisfaction with methods used to calculate Zakat

227

Table 6.8(b)

Degree of satisfaction with methods used to calculate Zakat

228

Table 6.9(a)

Placement of Zakat in the annual report

230

Table 6.9(b)

Placement of Zakat in the annual report

232

Table 6.10(a)

Auditing of Zakat

234

X11

Table 6.10(b)

Auditing of Zakat

236

Table 6.11(a)

Zakat regulation

237

Table 6.11(b)

Zakat regulation

238

Table 6.12(a)

Variations in Zakat evaluation

239

Table 6.12(b)

Variations in Zakat evaluation

240

Table 6.13(a)

Reasons behind low level of Zakat collection

243

Table 6.13(b)

Reasons behind low level of Zakat collection

244

Table 6.14(a)

Appoint and pay for Sharia supervisory committee

246

Table 6.14(b)

Appoint and pay for Sharia supervisory committee

248

Table 6.15(a)

The potential benefits from Zakat implementation

249

Table 6.15(b)

The potential benefits from Zakat implementation

251

Table 6.16(a)

Zakat measurementand disclosure

253

Table 6.16(b)

Zakat measurement and disclosure

254

Table 7.1

A sample of the recommended method

279

Xlll

GLOSSARY

OF

TERMS

Fai

property

Fidth

part
society

in

acquired
of

war

fai
is

whose
to
similar

fighting.

without

mode
Zakat.

of

distribution

in

Figh

jurisprudence:
it
Muslim
life;
political,
religious,

Fogaha

jurists
light
thereby,

Ghanimah

war

Hadith

deeds
a report
on the
sayings,
or tacit
approval
Mohmmad (peace be upon him).
of the Prophet

Halal

anything

permitted

Haram

anything

prohibited

Ijma

jurists
the
consensus
of
death
the
after
of the
be upon him).

Jahiliah

in Arabia
before
the period
the
Mohammad (peace be upon him).

Khalifah

a religious

Muamalat

affairs

Mudarib

the
partner
who
provides
entrepreneurship
in
management
a mudarabah
agreement
as
from the one who provides
the finance.

covers
social

all
or

aspects
economic.

of

issues
in
the
who
opinion
give
various
have,
Qu'ran
Sunnah
the
the
of
and
who
led
development
to the
of figh.

booty.

head
of

the

by

the

by

of

the

Shariah.
issue
fiqh
on any
of
Prophet
Mohammad (peace

a Moslem

advent

of

Prophet

state.

world.

level

for

Nisab

a minimum

Qadi

a man whose knowledge
of
to arrive
at judgements.

Qiyas

argument
areas.

exemption

by

Shariah.

in

analogy

xiv

the

Shariah

legal

levy

law

and

of

distinct

and

Zakat.

enables

theological

him

Qodat

plural

of

Qadi.
by
as given
guidance
aspects
all
and embodies
beliefs
including

Shariah

the
to
refers
Qu'ran
and the
the
Islamic
practices.

divine
Sunnah
faith,

Shura

consultations,
of opinion

discussions

before

is

decision

any

or

hearing

the
of
and

differences

made.

Sunnah

is
Sunnah
the
Qu'ran
the
the
most
after
faith
important
Islamic
and refers
source
of the
Mohammad's
to the Prophet
essentially
his
indicated
by
(peace
be upon him)
as
example
know
the
faith.
The only
way to
of
practise
the collection
Sunnah is through
of al-hadith.

Surah

a chapter

Tawheed

Islamic

Ummah

refers
irrespective
nationality,

in

the

faith

in

to

Qu'ran.
God

the
of
which

(i. e.,

Allah).

Moslem
whole
race,
colour,
in
no weight
carry

community,
language
or
Islam.

Ushr

)
(in
five
ten
of
per
cent
cases
some
cent
per
by a Moslem as apart
produce
payable
agricultural
like
Zakat,
his
mainly
religious
obligation,
of
for
the benefit
of the poor and the needy.

Immam

religious

Zakat

to
Moslems
pay
a
on
obligation
religious
their
the
value
of
of
percentage
predetermined
to the
commodities,
or properties
savings,
annual
Islamic
state.

scholar.

xiv

Chapter
Introduction

one

Chapter

one

Introduction
1.0

Introduction
is

Islam
complete

code

for

is

Islam

it

worship;

it

is

of

is

the

achieved

it

is

finally,

both

of

religion

religious

beliefs

integrated

civilisation;

Islam,

of

aspects

life,

of

and

the

impact

achievement

and,

commitment

distributive
According

message

human

of

society.

religious

and,

the
all

of

distribution

equitable
values

set

fields

a

system

of

code

for

a

it

and

governs

and

a

way

of

laws;

it

is

social

and

economic

and

norms.

aspect

system

and

way

a vast

conduct;

commercial

organising

individual

a

and

family

and

with

provides

all

to

came

it

because

religion

comprehensive

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culture

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applies

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a

secular:

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that

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The

existence.
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as

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all

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on

brotherhood

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the

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people

(Shariah),

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justice

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human

Islamic

goal

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provides
the

country.

of

justice

of

a

free-of-

is

interest

investment

interest

is

vital

injustice

and

exploitation

Islamic

The

in

inequalities
in

are

do

are

is

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are

done

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merely

it

pay

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some

circumstantial
has

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right

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inequality

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Zakat

all

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environment.

2

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wealthy

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than

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of

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distribution

and

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on

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symptoms.

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secure

amount

have

practical

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rules

root

in-built

narrow

emphasised

the

of

have

scholars

aim

the

at

the

on Muslims

according

rational.

Muslims

be

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duty

religious

alleviating

Muslim

it

of

elimination

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that

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at

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of

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have

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issue,

important

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is

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associated
recent,

so-called

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Islamic

countries.

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environment,

fall

of

and

some

together

drawing
of
the

up

these

plans

toward

to

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examined.

of

these

is

the

the

system

applicable

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doing

new

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changes,

Muslim

Arab
the

reconsider
to

them,

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unify

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and

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Saudi

these

in

aspect

harmonise

GCC countries.

system
the

involved

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challenges.

to

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in

recently

to

so,

followed

developments.

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Zakat

values.

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to

to

commercial

have

attempt

have

combat

religious

revenue

and

countries

new policies

possibility
was

economies

all

Muslims

economies.
oil

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almost

global

governments

stimulated

these

and

challenges

in

other

managerial.

motivates

changing

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flexible

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of
them

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with

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and

identity

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financial

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to

dominates

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decline

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real

developing

to

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countries,

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dealing

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countries.

impose

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subject

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study,
framework

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of

system

core

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countries

experience

in

been

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as

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to

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The
a

has

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is

intention

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is

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GCC

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find

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countries.

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answers

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questions.
"

is

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most

relevant

method

to

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teaching

respect
financial
"

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what

extent

could

such

a

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be

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throughout

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"

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accounting?

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countries,
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4

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economies

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and
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"

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Saudi

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adequate
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the

the

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a basis

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1.2

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review

findings.

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mainly,

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to

study,

A

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only

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on trade)

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imposed

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study,
a

wide
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countries)
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interviews

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four

countries

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it

although
was

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interview

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self-administered
time-consuming

1992: 201).

things,

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the

lack

limitation

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therefore,
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so,

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by

experienced

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kind
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and

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mentioning.

and

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research

main
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writings

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of

problems

6

the

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undertaken

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descriptive,

or

researcher.

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on

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literature

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than

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in

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participate

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data

rate.
the

advantages,

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of

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own

mentioned

introduce

to

and

its

method

to

chance

time

has

reasons

a high

ensure

in

method

the

individuals

motivate

to

limitation

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(questionnaire)

however,

also

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used

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does,

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world.

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of
Even

first

GCC countries.
limitations

in

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is

study

the

therefore,
opinions

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of

based
results
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of

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used

created

respondents

systems

fieldwork.

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study

(Bahrain,

Kuwait,

Saudi

Qatar

and

factors

of

Oman

were

cost

and

groups

reports,

investments

and
more
the

ordinary

at

public.

issue

the

four

United

Arab

of

the

Emirates).
due

to

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in

could

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countries

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time

studied

only

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countries

long

a

be

this

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analysts,

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thesis

is

introductory

of

to
and

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the

the

United

GCC

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into

structured
chapter,

background
Arabia

from

the

choice

the

annual
bankers

and

would

the

provide

a

between

accounting

GCC countries.

1.4
The

look

complete

and

Future

of

the

GCC

take

to

Arabia

include

members

experience
by

the

would

includes

excluded

to

subject

in

it

as

time.

and,

selected.

departments

the

views,

restricted

operating

problems

visit

to

as

survey

the

only

respondents

additional

arrange

questionnaire

reflect

and

bureaucratic

The

a

on

eight
second

countries;
Arab

Emirates,

7

thesis
chapters.
chapter
Bahrain,
focusing

Following
highlights

the

Kuwait,
on

the

Saudi
the

Gulf

socio-political

population,

three

Chapter

highlights
is

the
in

cover

is

society.

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of

systems

jurisprudence
in
In

system.

parts

and

of

main
to
of

that

the

brotherhood

their
the

of

of

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main

of

are
riba

and,
a brief

in

with

prohibition

of

the

riba

8

is

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equitable

description

they

are
of

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main

are
both
unity

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with
moral

realities.

of

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together

the

some

of

the

associated

economic

of

economic

principles

outlined,

set

foundations:

since
The

Islam,

relationship

in

a

sources

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justice;

objectives.

on

of

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main

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briefly

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its

thought

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teachings

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discusses

main

aspects

also
the

provides

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primary

and

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sources

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economics

income.

which

political

the

of

upon

Islamic

chapter

economic

Shariah's

the

The

This

introduces

and

by

and

Islam.

grounds

economics

some
and

sources

prohibition
and

it

social

distribution

similar

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including

wellbeing;

the

economic

Islam.

by

system.

established

addition,

economics,

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economic

principles

prescribed

chapter

Islamic

in

definitions

as

This

social,

backgrounds.

Islamic

main

underline

based.

Islamic

spiritual,

value

to

borders,

climate,

economic

system

order

the

of

the

economic

accounting

features

and

reviews

important

Zakat

location,

Council,

Co-operation

values
is

shown

difference

distinguishing

Islamic
Islamic

economics.

context

is

Chapter

four

monetary

a detailed

briefly

deals

how

Zakat

determined

in

different

the

Chapter

five

questions

of

accounting

duty

on

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in

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the

of

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an

Zakat,

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scholars

and

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Zakat

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research
have
be

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are

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Chapter

six

presents

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the

findings

of

together

sampling

with

procedures
tests

statistical

pilot
and

employed

discussed.

the

findings
for

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this

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disadvantages

and

presented

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research

methodology.

advantages

are

the

of

adopted

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in

study

analysis

the
of

a questionnaire
of

detailed

outlines

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on

role

Muslims.

that

ways

a

questionnaire
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for

situations

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testing

the

of

economy

wealthy

should

provides
and

using

are

appropriate.

most

addition,

the

with

various

examines

suggested

is

problems

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in

conventional

reviewed.

religious

mainly

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on

intervention

its

and

state

views

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presented.

from

economics

study,

from
Zakat

recommendations

9

the
accounting.
are

responses
Based
made.

Chapter
highlights

seven
its

summarises
main

the

conclusions.

10

findings

of

the

study

and

Chapter

two

General
background
the

to

GCC states

two

Chapter

background

General
2.0

Introduction

the

with

solely

history.

Although

affected

many
it

the

wealth

the
The

political

historical

and

factors

two

important

most

economic
to

appear
Gulf

the

establishment

of

This

chapter,

therefore,

the

Gulf

a general

economic

details

cultural

backgrounds.

the

the

reviews

is

as

well
An

their

as

analysis

11

has

the
social

Gulf
life
In

socio-cultural

similar

of

these

and

social

problems

regional

are

reasons

and

development.
behind

the

Council.

main

(GCC)

description

its

and

unchanged.

and

main

over-

exports

the

remains

Co-operation

Council

Co-operation

country,

be

land
oil

that

have

countries

gross

throughout

however,

common

stability

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life

economic

a

its
from

generated

and

Gulf

is

people,

traditional

the

aspirations.

its

associate

people

This

oil.

be remembered,

to

background,

of

most

which

of

ignores

deeply

addition

area

it

aspects

must

still

an

production
as

simplification

region,

is

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Arabian

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is

GCC states

the

to

countries.

given,

followed

respective
of

of

characteristics

important

For
by
social

each
brief
and

economic

indicators

is

given

and,

importance

of

Zakat

to

in

the

light

the

this

of

economics

the

of

the

analysis,

is

GCC countries

explained.

2.1

formed

Emirates

Arab

defence,

a unified

The

headquarters
The

Arabia.

1983,

the
its

of

removal

of

40%

local

(Rumaihi,

All

tariff

of

GCC is

the

establishment

of

been

Several

member

rule,

Saudi

was

signed

in

common

market

as

GCC-wide
including

then,

since

between
tax

Riyadh,

significant

implemented

barriers

in

single

1981

organisation.

economic

Agreement

a

in

Council

situated

Economic

Unified

GCC country.
and

as

well

GCC-owned

Many

harmonised

the
as

the
to

subject

states,

with

certain

same

rights

towards

the

most

businesses

in

and
in

all

are

government
and

regulations

in

towards

companies

facilities,

treatment

companies.

being,

have

countries

property

preferential

are

and

United

the

and

Co-operation

political

value-added

GCC member

incentives

owned

Gulf

Arabia

exceptions

1986).

ownership
any

Saudi

objectives.
have

regulations

a

of

GCC's

with

one

Qatar,

the

(GCC)

Council

Co-operation
Oman,

Kuwait,

Bahrain,

as

Gulf

The

GCC states

12

have

equal

the

accorded
purchases
policies

(Olfet,

to

access

locally

as
have

same

been,

1988).

or

following

the

in

section,

GCC countries
be

by

covered

2.1.1
a total

present

discussion

two

will

countries

Information,

are

not

the

of

has

six

of

620,000.

the

of

the

centre,
island

is
and

Bahrain

is

eastern

in

coast
coast

consists

the

Arabian

Saudi

of

Arabia

(Ministry

Qatar

of

loosely

in

of

the

Monetary
and

of

the

a

United
Fund,

Development

1998).

13

also

Arabic,

Nations,
and

the

(Bakri,

the

and

the

main

population.

Arab

League,

International
Jali,

in

commercial

of
the

two

located

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corner
of

means

is

Awali

capital

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square

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than

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town

oil

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of

Manama,

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contains

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islands

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located

the

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islands

30

western

land

a total

population
centre

the

translated

which,
It

seas.

the

Bahrain

1998)

largest

Bahrain

than

more

from

kilometres,

square

from

28 kilometres

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692

of

kilometres

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and

these

as

the

of

study.

of

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archipelago

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of

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each

Bahrain

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of

Qatar

on

given

of

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considered.

are

features

various

Ibrahim

Bank
and

background

Economic

2.1.1.1

Relatively

small

oil

prompted

Bahrain

to

liberalisation
a

more

industrial

countries

than

strong

other

(Economic

East

has

oil-

Affairs.

.

from

Earnings
This

1993.
increase

oil

by

20

in

Saudi

in

1993

percent

decreased

GDP

Bahrain's

the

of

with

by

1.2

in

Saudi

Arabia

to

the

percent

in

percent

and

Saf a

revenues
In

1996.

Per

Unit

Intelligence

Abu

Oil

waters.

12

and

percent

from

output

territorial

20

by

rise

arrangement

(Economist

US$8,420

was

an

share
is

which

income

to

Bahrain's

to

scheduled

were

due

was

oilfield,

1997)

it

(with

sectors)

Middle

the

and

a result,

structure

services

in

As

1970s.

the

economic

financial

and

producing

rose

in

population

diversification

economic

an

balanced

a fast-growing

and

pursue

programme

achieved

1998)

reserves

1997,

capita

Statistics,

.
has

Inflation

as

years,

a

was

the

well

Published

first

the

country

as

Bahrain

by

Government,

in

the

14

southern

recent

for

subsidies

generous

a slackening

in

generally

government's

its

policy,

as

commodities,

in

non-existent
of

result

economy(Information

Bahrain

almost

monetary

conservative

basic

been

of

demand

in

the

region

to

1996).

Gulf

have

an

oil-based
to

compared

Gulf

decade.
the

crude

has

declined

oil

and
in
in

percent

depressed

decade,

oil

as

a

prices.

bulk

the

petroleum

products

fuel

gasoline,

naphtha

for

petroleum
crude

85

about

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exports.
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oil,

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(Statistics

is

the

pan-Arab

ventures

majority

stake.

Aluminium

Bahrain

from

output

of

the

concessions

since

commercially

viable

contribution

to

GDP

1993

to

its

oil

and

jet

from

processing

heavy

the

Bahraini

first

to

be

15

1996).

but

crude

gas

locally

these
total

of

Petroleum,

industries

Saudi
1996).

that

are

holds

the

in

1971,

was

is

the

Government

example

produced
from

crude

as
oil,

country's

established,

Another

about

Together,

light

Ministry

was

fuel,

the

of

and

finance,

as

kerosene.

which

(Alba).

not

percent

several

in

1996

of

including

by

for

in

by Ministry

Published

The

of

diversification

Crude

processes

in

rate
end

17 percent
of

also

base

new

result

of

processed

account

the

sector's

Published

exports

until

small,

1986).

last

b/d(Statistics

oil,

no

gas

1996,

present

government

yielded

natural

the

world

Bahrain

and

(Rumaihi,

far

so

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40000

have

1980s

early

only

are

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at

last

exploration

reserves

oil

and,
to

expected

Renewed

sources

16

standards,

are

extraction,

Its

economy.

Arab

Shipbuilding
large

tankers

Ministry

and

of

The

dependence

has

total

Bahrain's
most

is

the

main

island.

and

the

expanding

constraints

also
1998)

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both

with

by

Published

to

to

reduce

order
foodstuffs.

is

The

Less

to

a narrow
of

scarcity

housing
agricultural

of

agriculture

country's

6 percent

of

land,

however,

and

in

strip

the

climate

developments

are

(Bakri,

development

of

north

hostile

a

water,

industrial

and

to

the

the

than

arable

considered

confined

developing

priority

et

al,

.

contribution

just

to

amounting
agricultural
domestic

Bahrain
the

in

area

this

(Statistics

ships

given

imported

on

deals

which

1996).

sector

agriculture

of

smaller

commerce,

government

(Asry)

Yard

Repair

and

sector
demand

its

owes

Gulf

to

Europe,

and
liberal

its
its

regulatory

Bahrain

Monetary

it

responsible

is

2

(EIU

1996.
15

satisfied

around

Statistics,

1997).

as

location

a

for

the

functions

issuing

16

1997

currency

as

the

centre

in

between

in
the
and

the

of

Asia
its

and

system,

Established

(BMA)

minimal,

percent

region

communications

environment.
Agency

In

financial

primary

within

excellent

GDP is

Bahrain's
in

percent

success
key

to

1973,

central

the
bank;

supervising

banking

investment

and

1994,

January

securities
Ministry

finance,

1997).

is

Bahrain
needs,

dependent

is

insufficient

crude

supplies

country's
terms,

equipment

suppliers

comprise

the

most

of
of

feed

the

import,
total

UK,

the

an

rapid

Japan
non-oil

Commerce,

and

over

Germany

17

oil

Arabia)
nearly

Machinery

and

import
the
are

of

its

or

raw
its

past
the

refinery,
are

for

(Information

1997).

by

country,

Saudi

non-oil

imports

goods

Sitra

giant

imports.

Bahrain

majority

oil-producing

accounting

growth

the

Published

capital

from

largest

financial

of

the

goods,

(largely

of

the

recorded
USA,

to

for

is

Bahrain

primary

value

imports

21

companies

Bahrain's

1989(Information

consumer

Although

output

June

on

for

whether

materials.

Ministry

in

22

includes

insurance

opening

two

foreign

of

also

in

event

of

(OBUS),

offices

exempt

long-awaited

Exchange
of

42

banks,

units

sector

As

country.

commercial
banking

important

the

was

the

representative

and
An

offshore.

development

18

institutions

companies

trading

in

offshore
47

and

financial

The

insurance

and

51

banks

investment

had

Bahrain

banks,

specialised

banks.

institutions

in

40%,
transport

category
few

the

and

years.

four
Published

The

leading
by

Social,

2.1.1.2
is

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the

the

The

rulers,

small

size

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as

opposed

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veto

over

of

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the

comes

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the

the

poorest

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highest

(72.0

In

(84%),

highest

human

index

value

Bahrain

also

relies

on

39%

represent

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rate

liberal

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representing

the

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its

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20% of

the

the

Gulf.
has

and

a

enrolment
(3.7%)

large

a

in

(Gulf

society,
in

highest
total

the

number

Bahrain

workforce

18

third

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third
lowest

adult

literacy

(95%)

and

(United

has

(Radwan

of

expatriates

News,

1997).

women's
GCC,
(Kapiszewki,

the

Nations

Bahrain
GCC

its

to

the

was

highest

the

compares

comes

was

Overall,
0.87

it

when

rate

of

of

in

expectancy

has

population.

nature

the

of

Bahrain

mortality

(1997).

Programme

Shiite

predominantly

family

country,

school

growth

population

is

ruling

life

also

highest

the

Development

GCC

infant

GCC. Bahrain

the

and

Arab

parliament.

1994,

years),

is

the

societies

GCC countries

other

has

Because

society

other

GCC and

from

Sunnites.

are

most

being

the

is

population

to

elected

in

population

Bahrain

partly

with

lowest

the

Island,

state

human

rate

Although

the

favourably

(20%)in

country

however,

sect.

non-tribal

smallest

half

than

more

background

and political

second
economy.

smallest

Muslim,

Cultural

with

the

(1998).

who
Because

activity
women
1998).

Kuwait

2.1.2
is

Kuwait

between

Gulf,
in

the

in

undoubtedly
to

one

relatively
This

1997).

had

highest

per

capita

income

regions

time

(per

capita

income

was

helped

by

that

Kuwait

Before

Following
dependent

grown
oil

discovery

the

labour.

developments
growing

demand

talents

in

shortage

refusal

of

by

part

absorb
for

all

national

Kuwaitis

fields

of

manpower,

a high

take

manual
19

a
in

a very
1997,

of

wealth

jobs

foreign
has

country

the

running

of

economic

necessitated

a

skills

and

activities

as

various

was

for

of

economic

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to

the
for

with

service.

civil

has

need

oil,

oil

expatriates

within

US$13,867

acceleration

the

of

poverty,

census

no

was

workers
the

of

1997).

of

expatriate

virtually
the

there

discovery

upon

the

Statistics,

oil,

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to

as

of
the

companies.

well

(EIU

million

a state

to

according

which,

1.81

reached

fact

the

has

country

from

population,

small

oil-rich

nation

was

islands

1998).

the

short

square

several

Information,

an

Arabia

17,818

include

of

as

is

state

Arabian

Saudi

and

transformed
the

of

Kuwait

the

of

west,

which

(Ministry

of

emergence

and
the

miles)

Gulf.

the

north

total

square

tip

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(7000

scattered

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in

Iraq

south-west.

kilometres

the

at

situated

accentuated

illiteracy

(Rumaihi,

rate

1986).

by

a

and

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The

GDP to

of

comes

directly

revenue

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percent

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absence

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investment
economic

rest

to
of

opportunities,
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and

6

with

hinders
of

the

funds

of

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mass

to

due

the

marketing

of

small

due

(Rumaihi,

20

the

size

Kuwait
many

of

oil,

to

economy
1986).

and
also

respects,
which

forces.

market

policies

to

expansion

in

the

GDP

1997).

world

subjects

to

however,

has,

production.

abroad,

for

economy

exports

years

the

and

the

ratio

1996

chances

a result,

industrial

the

of

the

ratio

due

in

percent

conditions

Statistics,

international

surplus

oil

compared

6.3

recent

demand

to

relation

vulnerable

channelling

1995.

(IMF

benefits

the

on

especially
it

market

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in

aggregate

the

As

production.

in

domestic

depends

eliminate

90 percent

domestic

eliminates

also

water

exports

by

Climatic

trade.

oil

1997

1994.

declining

of

this

of

Nevertheless,

gas.

decreased

foreign

volatile,

98 percent

in

95

average

1997).

also

agricultural
on

and

oil

11 percent

in

on

Kuwait;

Statistics,

5 percent

dependent

reduction

The

(EIU

contributed
of

of

by

flowing

expanding

been

export

expenditure
with

has

revenue

decreased

compared

more

the

from

1994

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was

industry

oil

percent

is

background

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2.1.2.1

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limited
to

makes
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external

Social,

2.1.2.2

is

Kuwait

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is

population

the

head

an

elected
in

of

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and

Kuwait

also

1997).

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Kuwait

in

in

relies

75.2

the

the

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Like

although

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country

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of

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ultimate

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high

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highest
workforce

Kuwait
in

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lowest

population

the

84%

of

the

UAE.
the

its

human

expectancy

infant

mortality

rate

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the
The

(5.6%).

rate

(79%)(UNDP,
index

human

1995

and

1997

workforce,

the

second

women's

activity

rate

GCC, with

(Kapiszewki,

21

after

1998).

expatriates.

in

of

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life

highest

second

(Radwan,

terms

growth

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predominantly

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had

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proportion
is

is

unelected,

doing

Kuwait

represented

Kuwait

33% of

is

third

has

0.84

highest

is

devastation

1994,

the

expatriates

liberal.

the

proportion

family

ruling

Emir)

Kuwait

GCC with

of

the

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the

War,

(20%),

value

large

GCC countries,

most

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the

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is

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affairs.

development.

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(the

parliament.

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the

largely

state

like

society.

in

but

is

background

political

country
the

Shiite,

political

Kuwait,

the

in

Kuwait

Bahrain,

and

smallest

economy

richest

say

Cultural

women representing
1998).

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suggests

Kuwait's

that

tribal

mostly

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social

relations.

in

coastal

country's

main

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area

is

Riyadh,

34

approximately
in
in

and

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south-east

by

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main
12

Tabuk,
expanse
(Ministry

Hail,

is

city
percent

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in
and

and

Information,

22

the

of

most

for
of

in

the

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population,

and

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population,

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unpopulated
1998).

with

areas
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the

along

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rural

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of

the

living

barren

capital

mountains

of

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accounts

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the

population.

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and

the

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of

the

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in

located

where

total

population,

Taif.

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(Hijaz),

of

proportion

the

also

Makkah

about

villages

about

is

Eastern

and

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of

the

of

in

large

relatively

percent

resort

inhabited

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in

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Gulf,

located.

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of

cities

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is

Kuwait

regions.

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Region

percent

holy

the

other

important

very

population

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which

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main

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of

25

about

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five

reserves

oil

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Arabia

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Arabia

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its

society.

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Saudi

relatively

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GCC countries.

2.1.3

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society

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land

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to

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between
and

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Al-Ahssa

the

emirates

into

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Jawf,

urban

14

in

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the

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the

in

of
Qur'an

emirate
districts.

rural

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and

local

are

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are

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into

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sub-

districts

Municipal

administer

Tabuk,

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Jizan
is

emirates.

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the

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Najran,

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or

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the

and

agencies

village

with

Holy

the

of

to

Qassim

are

and

of

responsibility

governorates,

contiguous

and

Region.

only

people

1986).

is

Region;

tribal

consists

the

Shariah

rests

authority

is

law

the

of

powers

the

to

good

supreme

Shariah

of

the

links
The

religion.

according

for

although

Medinah

and

defined

divided

South-West

emirates,

are

(Rumaihi,

of

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the

historical

strong

Islamic

and

serves

emirate

Al

with

constitution

is

and

Qurayyat,

Hogael,

King

Indeed,

Shariah

Makkah

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The

ruler.

the

King

enforcement

the

and

the

of
law).

the

monarchy,

a

government

Arabia.

God,

the

is

Arabia

Saudi

services

(Al-

1997).

population

since

1974,

almost

19.48

census

of

Saudi

estimated
million

October

in

1992,

Arabia's

1997(IMF

23

Statistics,

the
total

first
population
1997).

census
at

the

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contributes

development

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10

Saudi

Arabia

its

contribution

the

volatile

the

its

with

the

present,

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that

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more

than
the

billion,

the

due

increased
to

to
of

expansion

had

rose

oil

growth,

economic

recent

government

reduce

Government
to

1996,

by

2

US$7,291(EIU

budgeted

at

in

despite

the

1993

fall

rose

in

oil

to

in

GDP. This

actual

spending

1997
is

the

(EIU

prices

24

to

US$59
billion
planned

US$44

billion

Government

US$45.01

Statistics,

to

government

market.

oil

this

was

exceeded

rose

to

marginally,

of

order

US$1.9

Furthermore,

in

fall

a

in

expenditure

billion,

estimated

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revenue.

billion.

changes

positive

is

lead

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spending

US$40.26

it

and

40% of

when

US$10.40

low

prices

to

by

revenue

oil

oil

in

than

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declining

SA

currently

in

equivalent

or

spending

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in

income

percent

debt.

revenue

the

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capita

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prices
weak

20

stabilise

less

per

in

steadily

GDP

1997,

total

Although

oil.

factor

market

world's
its

supported

from

been

Arabia

1997).

Statistics,

forces

In

sector.
whilst

percent

oil

world

the

of

has

GDP has

Saudi

reserves,

percent

earnings

to

non-oil

oil

be a dominant

to

continues

sector

largest

world's

production.

oil

At

background

Economic

2.1.3.1

l997).

billion,

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Saudi

addition,

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Associated

supplies.

into

channelled
System

(MGS),

projects

in

treatment
for

the

the

also

world.

The

MGS

development

and

gas-gathering
the

provides

Kingdom's

the

of

engineering

comprises

plants,

is

Gas-Gathering

largest

the

of

vast

oilfields

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one

transmission

Kingdom's

billion

US$12
is

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have

to

privileged

from

gas

which

and
the

is

Arabia

basis

petrochemical

industries.

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two

building

materials

industrial

Government,

industrial

sectors

and
2

contributed

by

Published

alongside
Much

has

industries,

which

been

However,

in

projects

in

1996
the

US$33.33

the

of
in

the
for

SA was
billion

and

between

total

number

of

still

2,078,

with

(Ministry

25

of

1985
licensed
a

Finance,

total

based
sector

petrochemical
of

percent

to

industrial

these

of

60

non-oil
private

refining

investment
the

the

of

value

intended

was

substantial

accounted

industrial

of

strategy

diversification

and

sector,

developments

over

of

processing

(Information

industrial

1974

participation.

of

two

output

development

achieve

these

further

extraction

1996).

government's

value

1993,

By

the

with

for

metals

non-oil

of

deal

sectors
and

use.

percent

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mineral

major

the

total

and

1992.

industrial
investment
1996).

Accordingly,

banks,

central

as

is

monetary

strong

in

money

level

of

(Ministry

total

working

Saudi

majority

the

of

homogenous
extreme
openness
religion

GCC.

and

the

Kuwaiti
tradition

and

of

sector

a
is

by

the

credit

or

surplus

Bahrain
Sunnite

society
Bahraini

in

Saudi

26

and

a

with

compared
1997).

background

Kuwait,

and
which

the

makes

difference
as

opposed
The

systems.
Arabia

largest

the

with

important

Saudi

12

of

Kingdom

billion;

economy

is

and

consists

the

political

Another

population.

of

deficit

in

This

sector

Statistics,

Unlike

population

conservatism

US$8,051.5

largest

the

the

private

throughout

1996(IMF

Cultural
has

in

population

of
in

Social,

be

principally

payments

banking

branches

capital

Arabia

of

commercial

billion

US$11,374.6

balance

to

seen

1996).

1,170

with

2.1.3.2

the

the

present,

by

financial

inflation.

over

this

as well

of

SAMA is

most

of

rate,

exchange

determined

spending,

Finance,

of

banks,

by

and

is

with

agent

control

control

growth

supply

the

Indeed,

exercise

as

monetary

the

and

government

expansion,

for

Kingdom.

to

position

because

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as

responsible

the

(SAMA),

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acting

control

institutions

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is

It

government.

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SA

the

is

it

vast
a more

is

the

to