Evaluating the suitability of Arab countries for FDI

Evaluating the suitability of Arab countries for FDI

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Governments internationally are implementing various schemes and legislations to attract foreign direct investments.

The volatility associated with exchange rates is something investors just take into account seriously as the unpredictability of exchange rate changes may have a direct effect on their profitability. The currencies of gulf counties have all been fixed to the US 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 view the pegged exchange price as an crucial attraction for the inflow of FDI to the region as investors do not have to be worried about time and money spent manging the foreign currency risk. Another essential advantage that the gulf has is its geographical position, located at the crossroads of Europe, Asia, and Africa, the region functions as a gateway to the rapidly raising Middle East market.

To look at the viability of the Persian Gulf as a location for international direct investment, one must assess whether the Arab gulf countries provide the necessary and sufficient conditions to encourage FDIs. One of the consequential aspects is political security. How do we assess a state or even a area's security? Governmental security depends up to a large extent on the satisfaction of residents. People of GCC countries have plenty of opportunities to simply help them attain their dreams and convert them into realities, helping more info to make a lot of them satisfied and happy. Moreover, international indicators of political stability reveal that there is no major political unrest in the area, as well as the incident of such an eventuality is very unlikely given the strong political determination plus the vision of the leadership in these counties specially in dealing with political crises. Furthermore, high rates of misconduct can be hugely harmful to international investments as investors fear hazards including the obstructions of fund transfers and expropriations. But, when it comes to Gulf, experts in a study that compared 200 states classified the gulf countries as a low risk in both aspects. Certainly, Ramy Jallad in Ras Al Khaimah, a prominent investor would probably testify that a few corruption indexes concur that the region is enhancing year by year in cutting down corruption.

Nations around the world implement various schemes and enact legislations to attract foreign direct investments. Some nations such as the GCC countries are progressively implementing flexible laws and regulations, while some have cheaper labour costs as their comparative advantage. The advantages of FDI are, of course, mutual, as if the multinational firm finds lower labour expenses, it is able to cut costs. In addition, in the event that host country can grant better tariffs and savings, the company could diversify its markets via a subsidiary branch. Having said that, the state will be able to grow its economy, develop human capital, increase job opportunities, and provide access to expertise, technology, and abilities. Thus, economists argue, that oftentimes, FDI has led to effectiveness by transferring technology and knowledge towards the host country. Nevertheless, investors consider a many aspects before making a decision to invest in a state, but among the list of significant factors that they give consideration to determinants of investment decisions are location, exchange fluctuations, governmental stability and government policies.

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