Evaluating the suitability of Arab countries for FDI

Evaluating the suitability of Arab countries for FDI

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Governments all over the world are implementing various schemes and legislations to attract international direct investments.

The volatility associated with the exchange prices is something investors simply take seriously because the vagaries of currency exchange price fluctuations may have a direct impact on the profitability. The currencies of gulf counties have all been fixed to the US dollar 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 pegged exchange rate being an essential attraction for the inflow of FDI to the country as investors do not need to be concerned about time and money spent handling the foreign exchange instability. Another crucial benefit that the gulf has is its geographical location, situated on the intersection of Europe, Asia, and Africa, the region serves as a gateway towards the rapidly growing Middle East market.

To examine the suitableness regarding the Persian Gulf as a location for international direct investment, one must evaluate whether or not the Arab gulf countries provide the necessary and sufficient conditions to promote FDIs. One of the consequential elements is governmental stability. How do we assess a state or perhaps a region's stability? Governmental security will depend on up to a large extent on the content of citizens. Citizens website of GCC countries have a good amount of opportunities to aid them attain their dreams and convert them into realities, which makes a lot of them content and happy. Moreover, international indicators of political stability unveil that there has been no major governmental unrest in the area, as well as the incident of such a eventuality is extremely unlikely given the strong political will and also the vision of the leadership in these counties specially in dealing with crises. Moreover, high rates of corruption can be hugely detrimental to international investments as investors fear hazards including the obstructions of fund transfers and expropriations. But, in terms of Gulf, political scientists in a study that compared 200 counties deemed the gulf countries being a low danger in both categories. Certainly, Ramy Jallad in Ras Al Khaimah, a prominent investor would likely testify that several corruption indexes confirm that the Gulf countries is improving year by year in eliminating corruption.

Countries around the globe implement different schemes and enact legislations to attract foreign direct investments. Some countries like the GCC countries are progressively adopting pliable laws, while others have lower labour costs as their comparative advantage. The advantages of FDI are, of course, shared, as if the international company discovers reduced labour costs, it will be able to reduce costs. In addition, in the event that host state can give better tariffs and savings, the business enterprise could diversify its markets through a subsidiary branch. On the other hand, the state should be able to develop its economy, cultivate human capital, enhance job opportunities, and offer access to knowledge, technology, and skills. Therefore, economists argue, that oftentimes, FDI has led to efficiency by transferring technology and know-how towards the host country. Nevertheless, investors think about a many factors before making a decision to move in new market, but among the significant factors which they give consideration to determinants of investment decisions are geographic location, exchange volatility, governmental stability and governmental policies.

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