Evaluating the suitability of Arab countries for FDI

Evaluating the suitability of Arab countries for FDI

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Governments all over the world are implementing various schemes and legislations to attract international direct investments.

To look at the suitability of the Persian Gulf as a destination for foreign direct investment, one must assess if the Arab gulf countries provide the necessary and sufficient conditions to encourage FDIs. Among the important factors is political stability. Just how do we assess a country or even a area's stability? Governmental stability depends to a large extent on the content of inhabitants. Citizens of GCC countries have lots of opportunities to aid them attain their dreams and convert them into realities, helping to make most of them content and happy. Furthermore, global indicators of political stability unveil that there has been no major governmental unrest in in these countries, and also the occurrence of such a possibility is extremely unlikely provided the strong governmental determination as well as the farsightedness of the leadership in these counties specially in dealing with political crises. Furthermore, high levels of corruption could be extremely harmful to international investments as potential investors dread hazards such as the blockages of fund transfers and expropriations. Nonetheless, in terms of Gulf, experts in a study that compared 200 counties deemed the gulf countries as a low risk in both categories. Certainly, Ramy Jallad in Ras Al Khaimah, a prominent investor would likely testify that several corruption indexes concur that the Gulf countries is increasing read more year by year in reducing corruption.

Nations across the world implement different schemes and enact legislations to attract foreign direct investments. Some nations such as the GCC countries are increasingly adopting pliable laws and regulations, while others have actually cheaper labour costs as their comparative advantage. The benefits of FDI are, of course, shared, as if the multinational organization finds reduced labour costs, it is in a position to cut costs. In addition, if the host state can give better tariffs and savings, the company could diversify its markets by way of a subsidiary. On the other hand, the state should be able to grow its economy, cultivate human capital, enhance employment, and provide usage of expertise, technology, and abilities. Therefore, economists argue, that most of the time, FDI has led to efficiency by transmitting technology and know-how towards the country. However, investors think about a many factors before carefully deciding to invest in new market, but one of the significant factors that they think about determinants of investment decisions are location, exchange fluctuations, governmental security and governmental policies.

The volatility regarding the exchange rates is something investors just take seriously due to the fact unpredictability of currency exchange price fluctuations may have a direct effect on their profitability. The currencies of gulf counties have all been pegged to the US currency since the mid 1990s and early 2000s, and investors such Farhad Azima in Ras Al Khaimah and Oussama el-Omari in Ras Al Khaimah would likely view the fixed exchange rate being an essential seduction for the inflow of FDI into the region as investors don't have to be worried about time and money spent manging the foreign exchange risk. Another essential advantage that the gulf has is its geographical position, located on the crossroads of three continents, the region functions as a gateway to the rapidly growing Middle East market.

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