Assessing the suitability of Arab countries for foreign direct investment

Assessing the suitability of Arab countries for foreign direct investment

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Governments all over the world are implementing different schemes and legislations to attract foreign direct investments.

Countries all over the world implement various schemes and enact legislations to attract international direct investments. Some nations like the GCC countries are increasingly adopting flexible laws, while some have lower labour expenses as their comparative advantage. The advantages of FDI are, of course, shared, as if the international firm discovers reduced labour expenses, it will likely be able to minimise costs. In addition, if the host state can grant better tariffs and savings, the business could diversify its markets by way of a subsidiary. Having said that, the state will be able to develop its economy, develop human capital, increase employment, and provide usage of knowledge, technology, and skills. Hence, economists argue, that most of the time, FDI has generated efficiency by transmitting technology and know-how to the country. Nevertheless, investors look at a myriad of factors before deciding to invest in a state, but among the list of significant variables which they consider determinants of investment decisions are position on the map, exchange fluctuations, political security and government policies.

The volatility associated with the currency rates is one thing investors simply take seriously as the unpredictability of exchange price changes might have an impact on the profitability. The currencies of gulf counties have all been pegged to the United States 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 would likely see the fixed exchange rate being an crucial attraction for the inflow of FDI into the country as investors do not need to be concerned about time and money spent manging the foreign exchange risk. Another essential advantage that the gulf has is its geographical location, located at the intersection of three continents, the region serves as a gateway to the rapidly growing Middle East market.

To look at the viability of the Arabian Gulf being a location for international direct investment, one must assess whether the Arab gulf countries give you the necessary and adequate conditions to encourage FDIs. One of many consequential variables is political security. Just how do we assess a country or even a area's security? Political security will depend on up to a significant level on the satisfaction of citizens. People of GCC countries have a lot of opportunities to aid them achieve their dreams and convert them into realities, making a lot of them satisfied and grateful. Also, global indicators of governmental stability reveal that there has been no major political unrest in in these countries, and the incident of such an scenario is highly not likely given the strong political determination and the prudence of the leadership in these counties particularly in dealing with political crises. Moreover, high levels of misconduct can be hugely harmful to international investments as potential here investors dread risks for instance the blockages of fund transfers and expropriations. But, in terms of Gulf, economists in a study that compared 200 counties classified the gulf countries being a low danger in both categories. Certainly, Ramy Jallad in Ras Al Khaimah, a prominent investor may likely testify that several corruption indexes concur that the region is increasing year by year in eliminating corruption.

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