Evaluating the suitability of Arab countries for foreign direct investment

The GCC countries are actively carrying out policies to attract foreign investments.

Countries around the globe implement different schemes and enact legislations to attract foreign direct investments. Some countries like the GCC countries are increasingly implementing pliable regulations, while some have actually reduced labour expenses as their comparative advantage. The advantages of FDI are, of course, shared, as if the multinational business finds lower labour costs, it's going to be able to cut costs. In addition, if the host country can give better tariffs and savings, the business could diversify its markets by way of a subsidiary branch. Having said that, the country will be able to grow its economy, develop human capital, increase job opportunities, and provide access to knowledge, technology, and skills. Hence, economists argue, that in many cases, FDI has resulted in effectiveness by transmitting technology and knowledge to the country. However, investors look at a many aspects before making a decision to invest in new market, but among the significant variables that they think about determinants of investment decisions are location, exchange volatility, governmental stability and government policies.

To examine the suitableness regarding the Gulf being a location for foreign direct investment, one must assess if the Arab gulf countries give you the necessary and adequate conditions to promote FDIs. One of the important aspects is governmental stability. Just how do we evaluate a country or even a region's security? Governmental security depends to a large level on the content of people. Citizens of GCC countries have a good amount of opportunities to greatly help them achieve their dreams and convert them into realities, which makes a lot of them satisfied and grateful. Furthermore, international indicators of political stability show that there has been no major political unrest in in these countries, plus the incident of such a scenario is highly unlikely because of the strong governmental determination and the prudence of the leadership in these counties particularly in dealing with political crises. Moreover, high levels of misconduct could be extremely harmful to international investments as potential investors dread risks such as the blockages of fund transfers and expropriations. But, when it comes to Gulf, political scientists in a study that compared 200 states deemed the gulf countries . as a low hazard in both aspects. Indeed, Ramy Jallad in Ras Al Khaimah, a prominent investor would probably attest that a few corruption indexes confirm that the region is enhancing year by year in eliminating corruption.

The volatility associated with the exchange rates is one thing investors simply take into account seriously as the vagaries of currency exchange price changes may have an impact on their profitability. The currencies of gulf counties have all been pegged to the United States 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 may likely view the pegged exchange rate as an important attraction for the inflow of FDI to the country as investors do not need to worry about time and money spent handling the foreign currency risk. Another essential benefit that the gulf has is its geographic location, situated at the crossroads of Europe, Asia, and Africa, the region functions as a gateway to the rapidly growing Middle East market.