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Rentier economy and market need
Economical 02/15/2024
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Muhammad Fadel Al-Khafaji
The rentier economy refers to a type of economy that relies on the export of natural resources such as “oil or natural gas” and reliance on the revenues generated from those resources to finance the state’s needs. However, you find that the heavy reliance on the rentier economy is not enough to meet the state’s needs.
We point out that the rentier economy is unbalanced and unsustainable, as it depends heavily on the rise and fall in the prices of natural resources, which causes great economic instability. When the prices of natural resources are high, government expenditures rise, and when prices fall, government revenues decline. This fluctuation in revenues It constitutes a major challenge to the state's financial sustainability, and urgent solutions must be developed for this economic situation.
The maintenance of the rentier character of the economy leads to enhanced dependence on imports. The vast majority of countries with a rentier economy follow an approach that relies on importing most of the basic goods and products that citizens need. This means that the state spends a large portion of its revenues on importing basic products, which reduces the available resources. To invest in other sectors such as education, infrastructure and health.
The step required to enhance the reality of the economy requires building factories and attracting investment, which are the only solution to achieve economic and social development in the country, as building factories leads to opening new doors for employment, providing job opportunities for young people, and reducing unemployment rates, as building factories also leads to increasing production and diversifying local products, which It enhances the country's ability to export goods and increase national revenues.
Attracting foreign direct investment is necessary to enhance economic growth, as attracting foreign investment results in improving infrastructure and developing public services in the country, which attracts more new investments and enhances economic stability, in addition to the fact that “foreign investment” contributes to the transfer of technology and knowledge to the host country. Which contributes to developing local capabilities and raising the level of skills among workers. In this way, building factories and attracting investment can contribute to promoting comprehensive development and achieving prosperity and economic and social stability in countries.
We know that a rentier economy leads to a lack of economic diversification. When economies rely heavily on one type of resources, they become vulnerable to economic shocks, which requires us to think clearly about the diversification of financial revenues in light of the availability of the
elements of economic development.
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