Assessing the suitability of Arab countries for FDI

Assessing the suitability of Arab countries for FDI

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The GCC countries are actively adopting policies to invite international investments.

To examine the suitableness of the Persian Gulf as being a destination for foreign direct investment, one must assess if the Arab gulf countries provide the necessary and sufficient conditions to promote direct investments. Among the important elements is political security. How do we evaluate a country or even a region's security? Governmental stability depends up to a significant degree on the content of citizens. Citizens of GCC countries have actually plenty of opportunities to help them attain their dreams and convert them into realities, making most of them content and happy. Additionally, worldwide indicators of governmental stability unveil that there's been no major political unrest in in these countries, as well as the incident of such a possibility is extremely not likely because of the strong political will and the prudence of the leadership in these counties especially in dealing with crises. Moreover, high levels of corruption could be extremely harmful to foreign investments as potential investors fear hazards for instance the obstructions of fund transfers and expropriations. However, when it comes to Gulf, economists in a study that compared 200 states categorised the gulf countries as a low hazard in both aspects. Certainly, Ramy Jallad in Ras Al Khaimah, a prominent investor would likely attest that several corruption indexes confirm that the GCC countries is improving year by year in reducing corruption.

Countries all over the world implement different schemes and enact legislations to attract international direct investments. Some countries for instance the GCC countries are increasingly adopting flexible laws, while others have cheaper labour expenses as their comparative advantage. The advantages of FDI are, of course, shared, as if the international company finds reduced labour expenses, it will likely be able to minimise costs. In addition, in the event that host state can give better tariffs and savings, the company could diversify its markets via a subsidiary. On the other hand, the state will be able to grow its economy, develop human capital, enhance employment, and provide usage of knowledge, technology, and skills. Therefore, economists argue, that oftentimes, FDI has generated efficiency by transmitting technology and knowledge towards the country. Nevertheless, investors look at a numerous factors before carefully deciding to invest in a country, but one of the significant variables they think about determinants of investment decisions are location, exchange fluctuations, governmental stability and government policies.

The volatility associated with currency prices is something investors just take seriously due to the fact unpredictability of exchange price fluctuations could have a direct effect on the profitability. The currencies of gulf counties have all been pegged to the US currency since the late 1990s and early 2000s, and investors such Farhad Azima in Ras Al Khaimah and Oussama el-Omari in Ras Al Khaimah may likely view the fixed exchange price as an essential attraction for the inflow of FDI into the country as investors do not need certainly to worry about time and money spent handling the foreign currency uncertainty. Another important advantage that the gulf has is its geographical location, located on the intersection of Europe, Asia, and Africa, the region functions as a gateway towards the rapidly growing here Middle East market.

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