As nations around the globe attempt to attract international direct investments, the Arab Gulf stands apart being a strong potential destination.
Nations around the world implement various schemes and enact legislations to attract international direct investments. Some nations such as the GCC countries are increasingly adopting flexible regulations, while others have actually cheaper labour expenses as their comparative advantage. The many benefits of FDI are, needless to say, shared, as if the multinational company discovers lower labour expenses, it will likely be able to cut costs. In addition, if the host state can give better tariffs and savings, the business could diversify its markets through a subsidiary branch. Having said that, the country will be able to grow its economy, develop human capital, increase job opportunities, and provide usage of expertise, technology, and skills. Thus, economists argue, that in many cases, FDI has resulted in effectiveness by transmitting technology and know-how towards the host country. However, investors look at a many aspects before making a decision to invest in a state, but among the list of significant variables that they think about determinants of investment decisions are position on the map, exchange fluctuations, political stability and governmental policies.
The volatility associated with the currency prices is one thing investors simply take into account seriously since the unpredictability of exchange rate fluctuations might have an impact on their profitability. The currencies of gulf counties have all been fixed to the United States 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 would likely see the pegged exchange price being an important seduction for the inflow of FDI in to the region as investors do not need to worry about time and money spent handling the forex uncertainty. Another crucial advantage check here that the gulf has is its geographical location, located on the crossroads of Europe, Asia, and Africa, the region serves as a gateway towards the rapidly raising Middle East market.
To examine the suitability regarding the Arabian Gulf as being a destination for foreign direct investment, one must assess whether the Arab gulf countries provide the necessary and sufficient conditions to promote direct investments. One of many important factors is political stability. Just how do we evaluate a country or even a region's security? Political stability will depend on to a significant degree on the content of people. Citizens of GCC countries have plenty of opportunities to simply help them attain their dreams and convert them into realities, making most of them content and grateful. Additionally, global indicators of political stability unveil that there is no major governmental unrest in the area, plus the incident of such a scenario is highly not likely because of the strong political will plus the vision of the leadership in these counties particularly in dealing with crises. Moreover, high rates of corruption could be extremely harmful to international investments as potential investors fear hazards including the blockages of fund transfers and expropriations. Nonetheless, when it comes to Gulf, political scientists in a study that compared 200 states categorised the gulf countries as being a low risk in both categories. Indeed, Ramy Jallad in Ras Al Khaimah, a prominent investor would probably attest that a few corruption indexes make sure the region is increasing year by year in eradicating corruption.