Assessing the suitability of Arab countries for foreign direct investment

Assessing the suitability of Arab countries for foreign direct investment

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As countries across the world attempt to attract international direct investments, the Arab Gulf stands apart as a strong potential destination.

Nations across the world implement various schemes and enact legislations to attract international direct investments. Some nations like the GCC countries are progressively adopting pliable legislation, while some have lower labour expenses as their comparative advantage. Some great benefits of FDI are, of course, mutual, as if the multinational organization discovers reduced labour costs, it will likely be in a position to minimise costs. In addition, if the host state can give better tariffs and savings, business could diversify its markets by way of a subsidiary. On the other hand, the state will be able to develop its economy, develop human capital, increase job opportunities, and provide usage of expertise, technology, and abilities. Therefore, economists argue, that most of the time, FDI has led to effectiveness by transmitting technology and know-how to the host country. However, investors consider a myriad of aspects before deciding to move in a state, but one of the significant variables which they think about determinants of investment decisions are geographic location, exchange fluctuations, governmental stability and governmental policies.

To examine the viability regarding the Persian Gulf being a location for foreign direct investment, one must evaluate if the Arab gulf countries provide the necessary and sufficient conditions to promote FDIs. Among the important elements is political stability. How do we assess a country or even a region's security? Political stability will depend on up to a significant degree on the satisfaction of people. Citizens of GCC countries have actually lots of opportunities to aid them attain their dreams and convert them into realities, helping to make a lot of them content and grateful. Moreover, international indicators of governmental stability unveil that there is no major governmental unrest in in these countries, as well as the incident of such an eventuality is very not likely because of the strong governmental determination plus the prudence of the leadership in these counties particularly in dealing with crises. Moreover, high rates of corruption could be extremely detrimental to international investments as potential investors fear risks including the obstructions of fund transfers and expropriations. Nevertheless, when it comes to Gulf, economists in a study that compared 200 states deemed the gulf countries as a low hazard in both categories. Certainly, Ramy Jallad in Ras Al Khaimah, a prominent investor would likely testify that a few corruption indexes confirm that the region is enhancing year by year in cutting down corruption.

The volatility of the currency prices is one thing investors simply take seriously as the vagaries of currency exchange rate changes might have an impact on the profitability. The currencies of gulf counties have all been fixed to the United States dollar 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 see the fixed exchange rate as an crucial seduction for the inflow of FDI in to the region as here investors don't need to worry about time and money spent manging the foreign currency uncertainty. Another important advantage that the gulf has is its geographic location, located at the intersection of three continents, the region serves as a gateway towards the rapidly raising Middle East market.

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