Evaluating the suitability of Arab countries for foreign direct investment

Evaluating the suitability of Arab countries for foreign direct investment

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The GCC countries are actively developing policies to draw in foreign investments.

The volatility of the currency rates is one thing investors just take seriously since the unpredictability of currency exchange price changes could have a direct impact on their profitability. The currencies of gulf counties have all been pegged to the US currency from 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 see the pegged exchange price as an essential attraction for the inflow of FDI into the region as investors don't need to worry about time and money spent handling the foreign currency instability. Another important advantage that the gulf has is its geographical location, located at the crossroads of three continents, the region functions as a gateway to the quickly raising Middle East market.

Nations across the world implement different schemes and enact legislations to attract international direct investments. Some countries such as the GCC countries are increasingly implementing flexible laws and regulations, while some have actually lower labour costs as their comparative advantage. The advantages of FDI are, of course, mutual, as if the multinational business finds here reduced labour expenses, it will likely be in a position to cut costs. In addition, if the host state can give better tariffs and savings, the business enterprise could diversify its markets by way of a subsidiary. On the other hand, the country will be able to develop its economy, cultivate human capital, enhance job opportunities, and provide usage of expertise, technology, and abilities. Hence, economists argue, that oftentimes, FDI has led to efficiency by transferring technology and knowledge towards the country. Nonetheless, investors look at a numerous factors before carefully deciding to invest in a state, but among the significant factors they give consideration to determinants of investment decisions are position on the map, exchange fluctuations, political stability and governmental policies.

To examine the suitableness regarding the Gulf as being a destination for foreign direct investment, one must evaluate whether the Arab gulf countries provide the necessary and sufficient conditions to promote direct investments. One of the consequential elements is governmental stability. How can we assess a state or perhaps a area's stability? Political security depends up to a significant level on the content of people. People of GCC countries have actually plenty of opportunities to greatly help them attain their dreams and convert them into realities, making most of them satisfied and happy. Also, worldwide indicators of political stability reveal that there is no major governmental unrest in in these countries, plus the occurrence of such an scenario is extremely unlikely given the strong political determination and also the prudence of the leadership in these counties specially in dealing with political crises. Furthermore, high rates of misconduct can be extremely detrimental to foreign investments as investors dread risks for instance the blockages of fund transfers and expropriations. Nevertheless, when it comes to Gulf, economists in a study that compared 200 states categorised the gulf countries as a low risk in both aspects. Certainly, Ramy Jallad in Ras Al Khaimah, a prominent investor would likely attest that a few corruption indexes concur that the Gulf countries is increasing year by year in reducing corruption.

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