Please note that order was written in accordance to the instructions given in the original order. This includes the references or sources requested by you. Please note that I have far exceeded the number of references mentioned by you in your order. You have asked for Ross Levine’s work and I have given it to you. You have asked for comparison between the MENA and the advanced financial systems, I have given that to you. The case study method and the countries have been mentioned in your order and it has been executed accordingly. I have given some hints below but sending it in word would require you to pay extra because it is outside the scope of your order.”General comments:1) Your conclusion that financial development does not lead to growthis not sufficiently substantiated in the paper. You make thisconclusion several times based on limited and flawed data analysis.This is a major point as it seriously impacts your analysis.The statement that financial development does not lead to growth has not been made in the paper. What we have found is that the contentions that “factors associated with growth and banking activity are strongly and positively correlated” (page 5) have not been substantiated by the study. For instance, with its growth boosted by oil UAE has actually slowed down its opening up of banking sector.We have stated that financial development is not the prime cause of economic growth. Is this the same as financial development does not lead to growth?What we are saying is that Levine’s claim that “Financial systems exert first order, causal impact on economic growth” (page 21) is not substantiated by the evidence of the case study. Does this mean that we have stated that financial development does not lead to growth?What your faculty is trying to say is that there may some positive effects financial systems have on growth, however, however they have been overshadowed by the oil sector growth. You may include this argument as a qualification. This will make your argument more rounded.1.a) Most of the conclusions of studies you cite are based on examining data over a 20-30 year period. The data you present is either a single quarter or a couple of years of annual data. This amount of data is simply too short to be able to draw conclusions about the relationship between financial development and growth. No one claims that financial development leads to an immediate large increase in GDP. Its impact occurs over time and builds with the development of the financial sectorThe conclusions of the studies that I have cited are actually based on limited data and narrow data selected with the purpose of proving or disproving a hypothesis. In fact in the order I have been required to bring in Ross Levine’s work. His work is a lifetime work of a professor focused on proving that financial development leads to economic growth.In your order I have been given that I should be using the case method because limited data is available about the regions specified in the order. Moreover, these regions namely UAE, UK and Jordan have been given to me in the order. I have not selected these. The case method has been used because of the limited secondary data available. The case method seems to suggest that in these countries the growth of the economies is driven by oil and not by the development of the financial sector.1.b) You state that oil is the driving force in growth in many MENACountries. In any country there are a myriad of factors influencinggrowth. It is often very hard to disentangle the impact of a specificfactor on growth. It is highly likely that in Jordan, for example,financial development does have a positive impact on growth BUT this isovershadowed by the fact that oil has an even BIGGER impact on theeconomy. Thus, in order to make your conclusion that financialdevelopment is unimportant you would need to prove that aftercontrolling for other major factors influencing economic growth, thenfinancial development has no positive effect on the economy. This issomething you do not do and thus you cannot draw the conclusions youdraw.Over the period of years it has been examined that the economies of the MENA countries have been developed and affected by the fluctuation of the oil prices. Even a country like Jordan that is not an oil exporting country has been severely affected by the oil prices. It has over a period of time developed its financial sector to support its import-export business and to attract foreign financial investment. To a certain extent it has been successful. That has been shown in the case analysis, however what is more important is that the financial sector is only a support function, supporting the governments efforts to build up its export trade and to support the function of the government to attract investment.2) You need to better define what MENA is and also justify why you arelimiting yourself to examining UAE. You do this somewhat but this needs to be done at the beginning of the paper. In addition, you need to justify why you are comparing them to the UK and Jordan. Again this is done in the paper but this needs to be at least touched upon in the introduction. The introduction needs to contain a synopsis of what youdo, why you do it, and what we will learn from reading your paper. This needs to be improved compared to what you currently have written.In the order given by you have given me the countries UAE, Jordan and the UK. This was the scope of the paper. Why you have selected the countries UAE, Jordan and the UK needs to be justified by you.3) Your conclusions contradict the rest of your paper. The body of the paper claims that financial development does not lead to growth. Yet in the conclusion, your first point, you say that MENA countries should develop their financial systems. Why, if it is useless to growth should they devote resources to it. Improving the financial system is a theme throughout your conclusion/recommendations section and it is hard to understand why, given the body of the paper would suggest just the opposite.It seems that the person making the remarks has not properly read the paper. The paper gives several reasons why the financial systems should be developed. Since, financial systems form an important support system to business, the example has been given in the paper that just as good infrastructure is important for a country to do business, a good financial system is useful and important for countries who want to do business. Moreover, it has been argued in the paper that to attract foreign investment it is important to have a good financial system. Some countries need foreign investment more desperately than others. For, example UAE feels that it needs foreign investment less badly because of the escalating prices of oil. However, Jordan needs foreign investment more desperately because it is not an oil exporting country. In general the prescription for the MENA countries is that they should improve their financial system. Nowhere have we mentioned that financial systems are useless to growth! This is a preposterous misreading of the paper. What we have asserted is that the financial systems are not the prime movers of growth as suggested by Levin.4) You have too many sections where you have long quotes from otherauthors. It is OK to do this occasionally in a paper, but you do itmany, many times. This indicates that instead on providing analysis,you are merely stringing together other peoples thoughts. You need toeliminate almost all of these long quotes and instead work the ideasinto the paper IN YOUR OWN WORDS and ANALYSIS. If necessary you can add a footnote indicating that your summary and analysis is based uponsomeone else’s work – if you are worried about not getting accused ofplagiarism.In your own words has already been sent to you. These can be added where you wish:Chapter 3 (Page11/12):Even though the growth rate of the Arab countries seems to be above the world average of 2.9 percent, the countries of East Asian, the Pacific countries and the South Asian countries have performed better than the Arab countries. Moreover, the Arab countries seem to have better than the Latin American, the Caribbean and sub-Saharan Africa, with rates ranging between 3 percent and 1 percent. There was a strong rate of growth during the 1975 to 1980, which was followed by a steep drop in the growth rate after 1980. It was only during the 1980s that the countries recovered to a growth rate of 3.8 percent in 1990 and 1998. In general this means that the trend was downward even though the rate of financial development was positive. During this same period there was considerable development in the banking industry and in the capital markets of the region but there was no comparable improvement in the growth rate.Useful tracking of real GDP per capita needs to be related to purchasing power parity (PPP), using OECD [Organization for Economic Co-operation and Development] countries as the group to be compared with. The main issue is that even though in 1975, real PPP GDP per capita in the Arabian countries was 21.3 per cent [of the average OECD citizen], little more than one fifth of the OECD level(The Middle East Quarterly 2002). Even though the financial system had developed, by 1998, the real PPP income of the average Arab citizen had dropped to 13.9 per cent, or one seventh, of that of the average OECD citizen. (The Middle East Quarterly 2002)Another approach to this investigation is per capita expenditure on education. This expenditure an important indicator increased over the years from 1980 to 1985(The Middle East Quarterly 2002). The rise of this indicator however was short-lived. This rise was followed by stagnation during the latter half of the 1980s. While Arab countries continued to spend more on education per capita than developing countries as a group, the difference between them has been diminishing since the mid-1980s. What gives a distinct comparison is that the, per capita expenditure on education in Arab countries fell from 20 per cent of that in industrialized countries in 1980 to 10 per cent in the mid-1990s (The Middle East Quarterly 2002).Chapter 3 (Page 13/14):Till 2002, the capital markets of most MENA countries symbolized lesser shares of GDP than in emerging markets in Latin America and Asia. Moreover, in the GCC countries as well as Jordan market capitalization/GDP ratios were analogous to those in other emerging markets (MENA-OECD Investment Program 2005).. Still Jordan is struggling with its GDP growth rate and is marred with 30% unemployment. Because of the sales that are related to the rise in oil prices during recent years, equity prices have been increasing, especially in oil exporting countries. In the three years ending in June 2005, Dubai’s Stock market increased by 768% while Qatar’s increased 600%, and that of Kuwait and Saudi Arabia 225% and 290%, respectively. Moreover, Initial Public Offerings (IPOs) are at record levels (MENA-OECD Investment Program 2005). Because of this, the ratio of market capitalization to GDP of the GCC countries has risen further and is now close to that of many developed countries. Still, with a shortage of free float in most listed equities sold there is a shortage of liquidity. The proportion of traded equity to GDP remains lower than in other emerging markets. Partly as a result, MENA markets have a low weighting in most global emerging market indices” (MENA-OECD Investment Program 2005).Chapter 4 (Page 16/17):The UK GDP increased by 0.8 per cent in the second quarter of 2006, an increase from the rate of 0.7 per cent in the first quarter (Directgov 2006). The current GDP is now 2.6 per cent higher than the second quarter of 2005. The output of the production industries decreased by 0.2 per cent in the latest quarter, following growth of 0.8 per cent in the previous quarter(Directgov 2006). While output of manufacturing industries grew by 0.6 per cent, this was more than offset by a 4.0 per cent decline in mining and quarrying and a 3.0 per cent fall in the output of utilities. This gives us an inside view of how the UK GDP is being sustained. Certainly, this economy is not growing on the basis of manufacturing industries (Directgov 2006). What we assert is that the UK GDP growth is being fuelled by the service sector.Growth in the service sector increased to 1.0 per cent in the second quarter, from 0.7 per cent in the previous quarter. Moreover, the distribution sector grew by 0.8 per cent. Even the construction industry did not increase as fast as the service industry. Construction output rose by 0.5 per cent in the second quarter of 2006. On the other hand, household expenses rose 1.0 per cent in the second quarter, with heavy increase in durable and semi-durable goods, reflecting the sharp rise in retail sales(Directgov 2006). Even the government consumption has jumped up by 1.0 percent in the latest quarter and is now 2.0 percent above the corresponding level in the second quarter of 2005. Similarly, compensation of employees rose by 0.8 percent and is now at 6.1percent above corresponding level in 2005. An increase in the trade deficit was a dead weight on the GDP” (Directgov 2006).Chapter 4 (Page 20):There is target marketing and new product development across a large variety of deposit and loan products. UK has maintained leadership in these areas over France and Germany in an creative range of products and services related to personal banking”(HM Treasury 2000).. These innovations relate to the placement of banking services. These include a greater use of interactive TC services, telephone banking and the use of EFTPOS”(HM Treasury 2000)..Chapter 4 (Page 22/23):From the estimates of the International Monetary fund the UAE economy grew by 8.5 percent in 2005 in real terms. This rate eliminates the effect of inflation. In that year, bank deposit growth was strong, climbing 38.5 per cent to Dh324.7 billion with the proportion of current accounts in total deposits increasing to 34.5 per cent in 2005 from 30.5 per cent in 2003“(Trade Arabia 2006).. The information shows that UAE had a relatively high loan to GDP ratio of 72.3 per cent and deposit to GDP figure of 66.5 per cent. In that year, loans to the construction industry jumped 32.3 per cent in 2005 to Dh41.9 billion but the sector’s share in total credit, fell to 11.9 per cent from 13.6 per cent a couple of year ago. The banking sector also showed tremendous growth. It appears that the growth is fuelled by the increase in the oil prices. (Trade Arabia 2006). The central bank information shows personal loans for business purposes doubled at the end of 2005 to Dh70.5 billion from Dh35.5 in the preceding year. The credit from UAE’s 46 domestic and foreign banks jumped to Dh353.14 billion ($96.14 billion) in 2005 from Dh246.95 billion in the preceding year, said statistics released by the UAE Central Bank“(Trade Arabia 2006).Chapter 4 (Page 27/28):Jordan was badly hit by the Iraq war its exports suffered because they were targeted at Iraq, however, it has now recovered the trade as the rebuilding of Iraq has commenced.. What Jordan needs to do most is to reduce its budget deficit, reduce dependence on foreign grants and creating investment incentives to promote job(Coutsoukis Phoius 2006). Jordan is a small Arab country with shortages of water and other natural resources such as oil. Unemployment, poverty, debt and are fundamental problems, however it seems that King ABDALLAH, since assuming the throne in 1999, has undertaken some broad economic changes in a long-term effort to perk up living standards. Amman in the past three years has made efforts closely with the IMF, practiced prudent monetary policy, and made substantial progress with the privatization process. The government also has liberalized the trade rule sufficiently to secure Jordan’s membership in the WTO (2000), a free trade accord with the US (2001), and an association agreement with the EU (2001) (Coutsoukis Phoius 2006). These measures have helped pick up efficiency and have improved foreign investment opportunities in Jordan. Jordan imported most of its oil from Iraq, but the US-led war in Iraq in 2003 forced Jordan to turn to other Gulf nations, compelling the Jordanian Government to raise retail petroleum product prices and the sales tax base (Coutsoukis Phoius 2006).Chapter 4 (Page 28):The central bank in Jordan controls two banks—the Philadelphia Investment Bank and the Jordan Gulf Bank. Supervision has been strengthened, and rules have been made more lucid and updated, through banking reform”(Index of Economic Freedom 2006).. The U.S. Department of Commerce says that the banking law passed in 2000 “protects depositors’ interests, diminishes money market risk, guards against the concentration of lending, and includes articles on new banking practices (e-commerce and e-banking) and money laundering.” The Economist Intelligence Unit mentions that the Arab Bank governs the sector, accounting for about 60 percent of total banking assets. ”(Index of Economic Freedom 2006). The banking system however is weak there are large burdens of bad debt. According to the U.S. Department of Commerce, “While [central bank] officials estimate the bad debts at 15%, unofficial estimates put the figure closer to 20% or more, “Jordan’s banking system is open to foreign investment. The Economist Intelligence Unit says, “In Middle Eastern terms, Jordan’s financial services sector is relatively well developed. Until 2004 nine local commercial banks, two Islamic banks, five investment banks, and five foreign banks served it. In 2004 two Lebanese banks—Banque Audi and Banque du Liban et d’Outre Mer—and National Bank of Kuwait all entered the market.” ”(Index of Economic Freedom 2006).Chapter 4 (Page 29/30):Jordanian banks preferred financing trade rather than capital investment, these banks shied from making long-term loans and preferred lending to foreign companies. Each of these phenomena did not go well with the Jordanian government”(Coutsoukis Phoius 2004).. Statistics show that in 1985 more than 27 percent of commercial bank credit financed trade, whereas less than 10 percent financed corporate investment. In the mid-1980s, however, the government had become apprehensive that the banking sector was expanding too rapidly. One concern was that the proliferation of banks could engender excessive competition for assets and risky lending activity; as a result, in 1984 the Central Bank imposed a moratorium on the opening of new commercial banks”(Coutsoukis Phoius 2004).Chapter 4 (Page 31/32):Deposits were attracted from other Arab nations, and the savings and remittances of the many Jordanians who traditionally had never used banks were captured. These deposits were in turn funneled as loans to growing companies that needed capital. Monetization–the use of legal tender as a medium of exchange rather than barter–was very successful. By the mid-1980s, Jordan was the only Arab country in which the value of bank assets exceeded GDP”(Coutsoukis Phoius 2004).. Total commercial bank assets rose from JD1.1 billion in 1980 to JD2.3 billion in 1985. During the same period, total deposits increased from about JD800 million to JD1.7 billion. Demand deposits fell from about 35 percent to 20 percent of entire deposits, while savings deposits increased. Strict Central Bank consumer credit controls and government accomplishment in encouraging savings also were indicated by the expansion of the liquid money supply at about 7 percent per year from 1980 to 1987”(Coutsoukis Phoius 2004).. The liquid money supply touched about JD900 million during this period, with no major inflation. “The banking sector more than doubled loans and deposits between the mid-1970s and the early 1980s. During the same period, the number of financial institutions tripled. The government facilitated the expansion of banking services as a key to its economic development policy. Yet the expansion of the financial sector alone could not be the cause for increased growth”(Coutsoukis Phoius 2004)..Chapter 4 (Page 32/33):The ratification of the bilateral Free Trade Agreement with the U.S and the strong performance of the financial sector The Amman Stock Exchange index increased by 30 percent in 2001.The nonbank financial system is well diversified. As of 2000, there were 27 insurance companies, 76 authorized moneychangers, 37 investment companies (with assets of about 4 percent of GDP), and a Public Pension Fund (with assets of both private and public sector employees amounting to about 21 percent of GDP) (Creane S, Goyal R, Mobarak A, and Sab R 2003 b). Further, a new Trust Law will permit the opening of private mutual funds by creating proper fiduciary necessities and principles(Creane S, Goyal R, Mobarak A, and Sab R 2003 b). The stock exchange market is well developed. This is an important part of the Jordanian system. The stock market capitalization to GDP amounted to 80 percent in 2002, and the number of listed companies totaled 159. The corporate bond market remains untapped owing to the nonexistence of a secondary market for bonds. Jordan has a relatively strong institutional environment, this environment has led to an excellent development of the financial system, yet the system has not become a reason for economic growth (Creane S, Goyal R, Mobarak A, and Sab R 2003 b).Chapter 5 (page 35):Jordan joined the World Trade Organization (WTO) in April 2000. Moreover, a U.S.-Jordan Free Trade Agreement (FTA) came into force on December 17, 2001. In May 2001, the government transformed the Aqaba port and nearby region into a special economic zone (SEZ) gifting special incentives to investors (U.S. Department of State 2006).. The government is overhauling the investment incentive system in Jordan. It is re-examining investment enticements, with the combination of all investment encouragement activities under a renewed Jordan Investment Board (JIB), while outlay development would fall under a “Jordanian Agency for Economic Development (JAED)” that was just getting off the ground at the end of 2005. These developments will likely lead to increased investment openings in Jordan for U.S. investors (U.S. Department of State 2006).Chapter 5 (page 36):The promotions offered by the free trade zones in UAE make these ideal locations from which to start growing into the expanding Middle Eastern and Asian marketplaces (United Arab Emirates 2006). The free trade zones offer globally competing firms several rewards. Sectors that have always prospered in these particular areas include petroleum-related industries, merchandise, such as sugar and flour, and many of the lighter industries (United Arab Emirates 2006).Chapter 5 (Page37):In MENA countries existing policies and procedures are making the investment climate less attractive.The reasons are not far to seek, there is the lack of clear legal frameworks and regulations in some countries, is slowing progress in attracting private capital(I H S 2006).. Moreover, highly subsidized electricity systems with hazy contract structures and tariff rates are reducing the difference between in use costs and actual revenue generation. This situation is disappointing potential private investors for whom return on investment (ROI) is fundamental. Still, existing policies and procedures continue to make the situation less attractive. (I H S 2006).”An adverse investment environment, including the lack of lucid legal frameworks and policies in some countries, is slowing progress in attracting private capital. (I H S 2006)..”Specific comments:1) Abstract needs to be shorter (100-300 words maximum) This abstract is 299 words:There is academic research led by Ross Levine that there is a direct causal effect between the financial system of a country and its growth. The case method is adopted for the study. First, the financial systems and growth in the MENA conditions are examined. Then a comparison between the financial systems and growth of UAE and UK is made. The purpose is to explore the linkages between the financial systems and economic growth in a MENA country and a developed country. Next a comparison between the financial systems and growth of UAE and Jordan is made. Again the linkages between the financial systems and economic growth of the two countries are examined. The examination of the financial systems in the MENA countries shows different stages of development. However, the growth figures of the countries are in some way or the other inextricably linked to oil prices. The financial system of even UAE seems primitive especially when compared to those of the developed country. However, there is a quintessential difference between the purpose of the financial system in the MENA countries and those in the UK. In the MENA countries, the financial system consisting of banking and stock exchanges plays the role of an important infrastructure. However, in case of UK the financial system is by itself an important industry whose earnings significantly contribute to the country’s GDP. It is a part of the service industry. Even though a positive correlation is found between the financial system development and growth, the study was not able to establish a causal effect between the sophistication of the financial system and the economic growth. Economic growth in the MENA region is severely affected by the oil prices. Oil rich nations have gained from the recent price hike and the others have suffered.2) Section 2: when you state “literature shows” you need to citeseveral references to show that this is indeed the case. The number of references or sources that are mentioned in your original order limits me.3) Early in the paper it is not clear if you will be focusing on thebanking system, or stock markets or both. This needs to be made moreclear.Financial systems by definition means banking systems and stock markets. In a large number of MENA countries stock exchanges do not exist. Even the banking systems are marginally developed.4) In several sections you tend to be very repetitive. Try to be moreprecise and concise and tighten up the overall paper. This is not very precise. If he had given any specific examples I would have sorted it out. Besides if you enter the paraphrases, they will satisfy your supervisor.5) Any declarative statement you make should have some sort of proofattached – usually a citation or reference to someone who has shown theparticular fact in a paper or is the result of your analysis. Again this is broad sweeping statement., no specific example.6) Chart 1 is unreadable This means that there is some problem with his computer that needs to be fixed, because Chart 1 can be read comfortably. If you wish you may use the diagram handles and pull the diagram apart.7) You seem to imply that Islamic banking is worse than traditionalbanking. You either need to prove this or tone down your comments. Itis important to point out that the objectives of Islamic banking differfrom traditional banking. You need to be sure you are differentiatingbetween Islamic banking been inefficient (i.e. given the same objectives traditional banking is better at achieving them) and Islamic banking being efficient BUT with different objectives. I have already sent you an alternative paragraph replacing the Islamic banking paragraph. This is the alternative:There are several causes of banking failure in the MENA countries. There is a general failure on the part of regulatory reform. In other words it means that market failures are not corrected through orders, regulations and laws. The result is that the performance of the banking sector falls and can even lead to banking failure. The MENA countries typically fail on two counts. One is the failure of the regulatory mechanisms and the other is the system of making laws and rules that regulate the banking system. (Limam I 2001)One of the most important objectives of the regulatory improvements is to ensure that the banking reform supports the economy and economic growth. This regulatory improvement should also respond to the external environment in the outside world where there is a race towards deregulation to attract foreign capital. This is where the MENA countries stagger. They are not able to compete with fast deregulating environment, especially in the EU countries. For, example, regulation that increases the cost of production must quick be dismantled to remain competitive in the fast moving world of competition to attract factors of production. ((Limam I 2001).Limam I (2001) Workshop on Economic Regulation in MENA. Retrieved from: http://www.erf.org.eg/middle.php?file=nletter/oct01_13 on September 15, 2006. 8) In chapter 3 many of your criticisms appear to simply reflect thefact that the MENA countries are developing as opposed to developedcountries. You need to be careful to differentiate between institutions and systems which are in the process of developing and becoming better and institutions and systems which are simply inefficient and not developing (but rather stagnant and not likely to improve as the economy and country as a whole develops economically). What has been stressed is that the economic growth rate in certain oil rich MENA countries is higher than that of the developed countries. This is fuelled mainly by the increase in oil prices. This increase in economic growth rate has not been propelled by the sophistication of the financial system. In sharp contrast in UK where the financial system itself is a major industry and the role played is far wider than that of support to business, the economic growth to an extent may be encouraged and increased by the growth in the financial sector.