S

COMSATS UNIVERSITY ISLAMABAD

Islamic Banking and Finance

(IBF)
Assignment # 01

Submitted To:
Ma’am Dr. Sabeen

Submitted By:
Mohsin Iqbal (097)

BBA 5C

6th March, 2022

 Question

Take three countries as an example for different economic system prevailing in the world and
apply features on them.

Answer:
We have three types of economic system:

 Capitalism economic system.

 Socialism/ Communism economic system.
 Islamic economic system.

Now below are the mentioned features of different economic system.

Capitalist countries and its features:

1. United States: The United States is a capitalist economy. It's the financial device that is
going with our democratic shape of government, for starters. It lets in all people promoting
a legal product to begin a enterprise and maintain the profits.
Features:
 Economic Overview of the United States:- he U.S. economy features a highly-
developed and technologically-advanced services sector, which accounts for about
80% of its output. The U.S. economy is dominated by services-oriented companies in
areas such as technology, financial services, healthcare and retail.
 United States’ Trade Structure:- The U.S. is the 2nd leading exporter of goods and
services in the world and the number one leading importer. The United States
currently has more than a dozen free trade agreements in place.
 Exports from the United States:- Although the United States has lost some of its
competitive edge in recent decades, material goods still represent two thirds of its
total exports. The United States mainly exports high-value capital goods and
manufactured products, including industrial machinery, airplanes, motor vehicles
and chemicals.
 Stable Government.
 Good education system especially college and university.
 Consumer based economy
 Freedom of choice.
 Open and free markets.
 Property Rights.
2. Economy of New Zealand: it is a capitalist economy.

Features:
 New Zealand’s economy is developed, but it is comparatively small in the global
marketplace. In the late 19th and early 20th centuries, New Zealand’s standard of living,
based on the export of agricultural products, was one of the highest in the world, but
after the mid-20th century the rate of growth tended to be one of the slowest among
the developed countries.
 New Zealand has had a long history of government intervention in the economy, ranging
from state institutions’ competing in banking and insurance to an extensive social
security system
 Administrations have attempted to increase the flexibility of
the labor market by amending labor laws and encouraging immigration.
 New Zealand’s farming base required a relatively complex economy. Highly productive
pastoral farming, embracing extensive sheep grazing and large-scale milk production,
was made possible by a temperate climate, heavy investment in land improvement and
highly skilled farm management by owner-occupiers, who used one of the highest ratios
of capital to labor in farming anywhere in the world.
 Most minerals, metallic and nonmetallic, occur in New Zealand, but few are found in
sufficient quantities for commercial exploitation. New Zealand’s energy comes from
both fossil fuels and renewable resources such as hydroelectric, wind, and geothermal
power. 
 Even in the 19th century New Zealand’s relative geographic isolation made necessary a
proportionately large industrial labor force engaged in the manufacture and repair of
agricultural machinery and in shipbuilding, brewing, and timber processing.
 Banking was established early in New Zealand, and over the years several large state-
and foreign-owned commercial (trading) banks emerged.
 Agricultural products: principally meat, dairy products, and fruits and vegetables—are
New Zealand’s major exports; crude oil and wood and paper products are also
significant.
 The public-service sector is a large employer, especially in Wellington, where the head
offices of government departments are located. Tourism is an important part of New
Zealand’s economy.
 The labor force was organized into strong trade unions from the late 19th century. Like
Australia, New Zealand evolved a system of compulsory arbitration in which the
government played a major role.
3. Singapore:
 Features:
 The economy of Singapore is a highly developed free-market economy.
 Singapore has low tax-rates and the second-highest per-capita GDP in the world in
terms of purchasing power parity (PPP).
 Alongside the business-friendly reputation, state-owned enterprises play a
substantial role in Singapore's economy.
 The country's main exports include electronics, chemicals and services. Singapore is
the regional hub for wealth management. Water is scarce in Singapore; therefore it
is defined as a precious resource.
 On 17 November 1869, the Suez Canal opens, connecting the Mediterranean Sea to
the Red Sea. This allowed for an decrease in travel time, which resulted in a rise in
trade volume. 
  On August 1, 1961, the Singapore Government established the Economic
Development Board to spearhead an investment drive, and make Singapore an
attractive destination for foreign investment.
  The government highlighted a focus in technology and education to be the new
wave of economic gain.
 Singapore is the pricing center and leading oil trading hub in Asia. The oil industry
makes up 5% of Singapore's GDP, with Singapore being one of the top three export
refining centers in the world
 Tourism plays an important role in the economy of Singapore. Singapore ranks
among the most visited cities in the world.

Socialist countries and its features:

Features of China Economic System:-
The Communist Party of China maintains up with that no matter personal capitalists and
marketers with public and collective enterprise, China is simply now no longer an capitalist. It's
a Socialist United States of America since the birthday celebration holds command over the
bearing of the country, preserving up with its direction of communist flip of events. A large a
part of the Chinese financial system remains authorities-managed, despite the fact that the
wide variety of presidency packages has declined significantly. Healthcare costs, for instance,
are blanketed for 95% of the population via 3 public coverage packages. China’s overseas
coverage is still pro-socialist; however it has basically turned out to be a unfastened-
marketplace financial system. In essence, china now no longer ultimate components a "natural
socialist financial system." Interestingly, the personal owned companies purportedly create a
full-size piece of GDP for China: 60%, as country-possessed undertakings simply make a
contribution 40%. After the U.S., China is the second-largest financial system on the earth and
the principle largest production financial system. Successfully, China modified from a "socialist
financial system" to a "socialist marketplace financial system." The socialist machine in China
right away understood that it's far its drawback to hold China's financial system remote from
the relaxation of the global. Policies allow marketers and traders to take income but in the
controls of the country. Around 2004, the authorities began out to allow an individual's all in all
accurate to personal property. Establishing a unique financial region and establishing as much
as international trade have accredited the united states of America to set out on excessive pace
financial growth; all courtesy to the proper modifications to the socialist rules on the vital time.

2. Cuba’s

Features:-
Cuba is a socialist United States of America. Cuba has a normally country-run financial system
consisting of a country wide healthcare program, authorities-supported schooling unfastened
for its citizens in any respect levels, subsidized lodging, utilities, amusement, and, surprisingly,
sponsored meals packages. Together, those social initiatives are meant to make up for the low
compensations of Cuban laborers, enhancing them off than their international companions in
several exclusive nations. As a socialist financial system, Cuba has an basically organized
financial system with round 88% of its exertions pressure running in country-possessed
enterprises, as of December 2017. Cuba would not have a inventory trade; a critical indicator of
a capital unfastened financial system. Cuba's Economy Today Former President Raúl Castro
unveiled financial reforms in 2010 aimed to shift towards a combined financial system that
could permit unfastened-marketplace mechanisms, do away with authorities manage of small
businesses, lay off needless country workers, and make self-employment easier. Why become
this variation required in natural "socialist financial system"? The rationalization is that Cuba's
financial system become in chaos. Gross home product become enlisted at 2.4, ch 12 months
with stagnation at 2,ch 12 months all through Raul Castro's management from 2008 to 2018.
This seems to be now no longer precisely the 5% every year improvement required in Cuba to
help improvement. Moreover, the country has encountered deficiencies of purchaser staples,
power rationing, and fee inflation. As of today, Cuba works with a; one which works at the
parallel monetary machine; trendy social initiatives in primary regions whilst allowing a
unfastened marketplace financial system with inside the tourism, commodity, and international
enterprise regions. Starting at 2017, 12% of Cuban professionals have been applied with inside
the personal quarter. The personal quarter in a few form or shape affords profits and jobs to 4
out of 10 Cubans of running age. The country has saved on providing modifications via new
legal guidelines pointed towards obtaining better overseas investment, which become a shift
from being a complement of the financial system to a essential piece of it. It is clear that Cuba
has created a ways from its socialist financial system to one which spotlights on executing
capitalist structures.

4. North Korea’s:
Features:
North Korea the globe’s maximum authoritarian country-is one extra distinguished instance
of a socialist financial system. Like Cuba, North Korea has an most often country managed
financial system, with similar social initiatives to the ones of Cuba. There isn't any inventory
trade in North Korea all matters considered. Around mid-1975, North Korea becomes higher
knowledgeable and extra effective than China (primarily based totally on global exchange in
step with capita). However, the financial and social state of affairs has been precarious in
North Korea due to the fact a big famine hit the united states of America among 1994 and
1998.Today, several global powers have stopped manual and exchange with North Korea
because of the numerous human rights abuse allegations of the totalitarian authorities
These sanctions via way of means of different global powers have basically limited any
financial development of the North Korean financial system. Apart from the problems of
dynastic rule in North Korea, which maintains the United States of America from turning
into unbiased, the assignment of "military-first governmental issues" likewise forces a full-
size weight at the financial system. North Korea’s handiest overseas-exchange associate is
China, and the enterprise is crushed via way of means of mediators who professional the
preparations among Chinese companies and Korean companies. This has completely close
off North Korea on basically all fronts. In May of 2019, the United Nations assessed that 10
million North Koreans have been confronting critical meals shortages. Over 43% of the
population is suspected to be undernourished. Recent Developments in North Korea Due to
a lack of unbiased production places of work and markets with inside the country and
increasing reliance on China, personal companies and companies are at the ascent in North
Korea. Irrespective of the prevailing conditions and causal factors, the improvement of
parallel “second” markets, in which residents and companies exchange or barter for items
and services, are thriving. . Demonstrating a large shift from the vigorously managed
"socialist" financial system of North Korea, this parallel machine is seeing contribution from
all-housewives buying and selling unused merchandise for those required, ranchers
promoting their produce locally, and an increasing wide variety of companies bringing in
Chinese products via professionals. Lack of credible respectable data on North Korea makes
it difficult to study the financial improvement, however to be had data does factor to the
lifestyles of an exclusive monetary machine.
Islamic countries and its features:
1. Malaysia:
 Malaysia’s economic freedom score is 68.1, making its economy the 42nd freest in the 2022
Index. Malaysia is ranked 8th among 39 countries in the Asia–Pacific region, and its overall
score is above the regional and world averages. Economic growth slowed in Malaysia from
2017 through 2019, turned negative in 2020, and resumed in 2021. The country has
recorded a 5.7-point overall loss of economic freedom since 2017 and has fallen from the
“Mostly Free” category to the “Moderately Free” category. Government size is well
calibrated, and monetary freedom and trade freedom are bright spots, but reforms are
needed to upgrade investment and financial freedom. Problems related to government
integrity need serious attention.

Features of Malaysia:
1) Rule of law.
2) Government Size.
3) Regulatory efficiency.
4) Open markets.
Rule of law:
Protection of property rights is strong, and the property registration and titling system is
reliable. Judicial independence is often compromised by extensive executive influence.
Although hundreds of public officials were arrested for corruption and bribery in 2019 and
2020, the perceived special treatment accorded to a former prime minister and his wife in
2020 on charges related to the multibillion-dollar 1Malaysia Development Berhad scandal
stoked public outrage.
Government Size:
The top individual income tax rate is 30 percent, and the top corporate tax rate is 24
percent. The overall tax burden equals 12.0 percent of total domestic income. Government
spending has amounted to 23.9 percent of total output (GDP) over the past three years, and
budget deficits have averaged 3.3 percent of GDP. Public debt is equivalent to 67.5 percent
of GDP.
Regulatory efficiency:
Incorporation requirements have been simplified under the Companies Act of 2016. In
2018, the government noted the need to “establish an accountability mechanism for the
implementation of regulatory reviews,” but little progress has been made. Until the advent
of COVID-19, the economy was typically operating at or near full employment. The
government continues to target its fuel subsidy program narrowly and efficiently.
Open markets:
Malaysia has 15 preferential trade agreements in force. The trade-weighted average tariff
rate is 3.9 percent, and 74 nontariff measures are in effect. Foreign investment is officially
welcome, and efforts to attract more flows have been made, but a lack of transparency may
 deter dynamic growth in new investment. Despite the challenging external environment,
the banking sector remains stable.
2. United Arab Emirates:
The United Arab Emirates’ economic freedom score is 70.2, making its economy the 33rd
freest in the 2022 Index. The United Arab Emirates is ranked 1st among 14 countries in the
Middle East and North Africa region, and its overall score is above the regional and world
averages. The economy of the United Arab Emirates has grown slowly over the past decade,
and most progress was wiped out by a contraction in 2020. Economic freedom has declined
over the same period. Dragged down by lower scores for judicial effectiveness and labor
freedom, the United Arab Emirates has recorded a 6.7-point overall loss of economic
freedom since 2017 and is now nearly at the bottom of the “Mostly Free” category. Fiscal
health is robust, but judicial effectiveness is weak.
Features of United Arab Emirates:
1) Rule of law.
2) Government Size.
3) Regulatory efficiency.
4) Open markets.
Rule of law:
The federal government allows individual emirates to decide the mechanisms through
which ownership of land may be transferred. Enforcement of property rights is predictable
and fair. The judiciary is not independent, but the rule of law is generally well maintained.
The UAE is among the least corrupt countries in the region. Nevertheless, nepotism and
corruption persist, and the government generally lacks transparency.
Government Size:
The UAE has no income tax and no federal-level corporate tax. Different corporate tax rates
exist in some emirates, and a value-added tax has been in force since 2018. The overall tax
burden equals 1.0 percent of total domestic income. Government spending has amounted
to 30.8 percent of total output (GDP) over the past three years, and budget deficits have
averaged 1.6 percent of GDP. Public debt is equivalent to 38.3 percent of GDP.
Regulatory efficiency:
Several laws passed since 2020 have been designed to make foreign ownership of
businesses and long-term citizenship by foreigners a reality. The UAE also has approved a
resolution to combat commercial fraud. Labor force participation among citizens is low.
Subsidized state-owned enterprises are a key component of the UAE economic model, and
the government monitors prices of goods and services to ensure that they are not raised.
Open markets:
The United Arab Emirates has four preferential trade agreements in force. The trade-
weighted average tariff rate is 3.4 percent, and 73 nontariff measures are in effect. Efforts
 to attract increased foreign investment continue, and more sectors are open to greater
foreign ownership. The modern financial sector is competitive and offers diversified
services. State-owned banks have maintained a strong presence, but foreign banks have
over 100 branches.
3. Saudi Arabic:
Saudi Arabia’s economic freedom score is 55.5, making its economy the 118th freest in the
2022 Index. Saudi Arabia is ranked 9th among 14 countries in the Middle East and North
Africa region, and its overall score is below the regional and world averages. The Saudi
Arabian economy was gaining strength five years ago before slowing in 2019 and then
contracting in 2020. Growth resumed in 2021. Economic freedom has fluctuated over the
past five years. Dragged down by sharply lower scores for fiscal health, judicial
effectiveness, and property rights, the kingdom has recorded a substantial 8.9-point overall
loss of economic freedom since 2017 and is now near the middle of the “Mostly Unfree”
category. Generous state subsidies have been accompanied by light taxation, but
government integrity and financial freedom have lagged.

Features of Saudi Arabia:

1) Rule of law.
2) Government Size.
3) Regulatory efficiency.
4) Open markets.
Rule of law:
Property rights are protected, and the legal system facilitates their acquisition and
disposition. The judiciary lacks independence and is slow and nontransparent. Its decisions
are coordinated with the executive branch, and enforcement of court judgments can take
years. Some officials are believed to engage in corrupt practices with impunity. The oil and
energy sectors are heavily influenced by the royal family and other elites.
Government Size:
Saudi nationals or citizens of the Gulf Cooperation Council and corporations pay a 2.5
percent religious tax mandated by Islamic law. Other taxes include a value-added tax. The
overall tax burden equals 7.4 percent of total domestic income. Government spending has
amounted to 37.7 percent of total output (GDP) over the past three years, and budget
deficits have averaged 7.1 percent of GDP. Public debt is equivalent to 32.4 percent of GDP.
Regulatory efficiency:
A new initiative to attract multinational companies was announced in 2021. Reforms have
allowed more women to enter the workforce, but private businesses have been subject to
disruptions from “Saudization” policies requiring them to employ a quota of Saudi workers.
 Stepping back from the subsidy reforms introduced by Crown Prince Mohammed bin
Salman, the government restored subsidized price caps for gasoline in 2021.

Open Markets:
Saudi Arabia has three preferential trade agreements in force. The trade-weighted average
tariff rate is 5.1 percent, and 143 nontariff measures are in effect. Regulatory reforms have
been made to allow foreign investors to own controlling stakes in firms. The financial sector,
which offers a range of financing options, has undergone gradual transformation with limits
eased on foreign investment in financial services.

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