Evaluating the suitability of Arab countries for FDI

The GCC countries are earnestly developing policies to entice foreign investments.

To look at the suitability of the Persian Gulf as a location for foreign direct investment, one must assess whether the Arab gulf countries provide the necessary and sufficient conditions to encourage FDIs. Among the consequential factors is political security. How do we evaluate a country or even a area's stability? Political security will depend on to a significant extent on the satisfaction of citizens. Citizens of GCC countries have actually plenty of opportunities to help them attain their dreams and convert them into realities, which makes a lot of them satisfied and happy. Furthermore, worldwide indicators of political stability unveil that there has been no major political unrest in the region, and also the incident of such an eventuality is extremely not likely because of the strong political determination and the prescience of the leadership in these counties particularly in dealing with crises. Moreover, high levels of misconduct can be hugely detrimental to international investments as potential investors fear risks such as the blockages of fund transfers and expropriations. Nonetheless, when it comes to Gulf, political scientists in a study that compared 200 states deemed the gulf countries as a low risk in both aspects. Indeed, Ramy Jallad in Ras Al Khaimah, a prominent investor would probably testify that a few corruption indexes concur that the Gulf countries is increasing year by year in eradicating corruption.

The volatility associated with the currency rates is something investors simply take seriously due to the fact unpredictability of exchange rate fluctuations may have a visible impact on the profitability. The currencies of gulf counties have all been fixed to the US currency 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 crucial attraction for the inflow of FDI in to the region as investors do not need certainly to be worried about time and money spent handling the forex risk. Another essential advantage that the gulf has is its geographical location, located on the intersection of three continents, the region functions as a gateway to the quickly growing Middle East market.

Nations across the world implement different schemes and enact legislations to attract foreign direct investments. Some nations such as the GCC countries are progressively adopting flexible laws and regulations, while others have lower labour expenses as . their comparative advantage. The benefits of FDI are, of course, shared, as if the multinational company discovers lower labour expenses, it will be able to minimise costs. In addition, in the event that host country can grant better tariffs and savings, the business enterprise could diversify its markets by way of a subsidiary. On the other hand, the country should be able to develop its economy, develop human capital, enhance employment, and provide usage of knowledge, technology, and abilities. Hence, economists argue, that most of the time, FDI has led to effectiveness by transferring technology and knowledge to the host country. However, investors think about a many aspects before carefully deciding to invest in a country, but among the significant factors which they think about determinants of investment decisions are location, exchange volatility, governmental stability and governmental policies.