Assessing the suitability of Arab countries for FDI

Assessing the suitability of Arab countries for FDI

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The GCC countries are earnestly developing policies to attract foreign investments.

The volatility associated with currency prices is one thing investors just take seriously since the read more unpredictability of currency exchange rate fluctuations may have a direct impact on their profitability. The currencies of gulf counties have all been fixed to the US currency from the mid 1990s and early 2000s, and investors such Farhad Azima in Ras Al Khaimah and Oussama el-Omari in Ras Al Khaimah would likely see the fixed exchange price as an important seduction for the inflow of FDI to the country as investors don't have to be worried about time and money spent handling the foreign currency risk. Another important benefit that the gulf has is its geographical location, located at the crossroads of three continents, the region functions as a gateway to the rapidly growing Middle East market.

Nations around the world implement different schemes and enact legislations to attract international direct investments. Some nations for instance the GCC countries are increasingly implementing pliable laws and regulations, while some have reduced labour expenses as their comparative advantage. The benefits of FDI are, needless to say, shared, as if the international company finds lower labour expenses, it'll be in a position to reduce costs. In addition, in the event that host country can grant better tariffs and savings, the company could diversify its markets via a subsidiary. Having said that, the state should be able to develop its economy, cultivate human capital, increase job opportunities, and offer access to knowledge, technology, and skills. Thus, economists argue, that oftentimes, FDI has generated efficiency by transferring technology and knowledge towards the host country. However, investors consider a numerous factors before making a decision to move in new market, but among the list of significant variables that they consider determinants of investment decisions are geographic location, exchange volatility, political security and government policies.

To examine the viability of the Persian Gulf as being a location for international direct investment, one must assess whether the Arab gulf countries provide the necessary and sufficient conditions to encourage direct investments. One of the important factors is political stability. Just how do we assess a country or perhaps a region's stability? Political stability will depend on to a significant extent on the satisfaction of people. People of GCC countries have actually plenty of opportunities to aid them attain their dreams and convert them into realities, which makes most of them satisfied and happy. Furthermore, international indicators of political stability show that there's been no major political unrest in the area, and the incident of such an eventuality is extremely not likely because of the strong governmental will as well as the farsightedness of the leadership in these counties especially in dealing with political crises. Moreover, high levels of corruption can be extremely detrimental to international investments as potential investors fear risks like the blockages of fund transfers and expropriations. Nevertheless, in terms of Gulf, political scientists in a study that compared 200 counties categorised the gulf countries as a low danger in both aspects. Certainly, Ramy Jallad in Ras Al Khaimah, a prominent investor would probably attest that a few corruption indexes confirm that the GCC countries is increasing year by year in eliminating corruption.

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