As nations around the world attempt to attract foreign direct investments, the Arab Gulf stands out being a strong potential destination.
To look at the suitability of the Gulf as a destination for international direct investment, one must evaluate whether or not the Arab gulf countries give you the necessary and sufficient conditions to promote FDIs. One of many important elements is political stability. Just how do we assess a country or even a area's security? Political security depends up to a large extent on the satisfaction of citizens. People of GCC countries have actually a great amount of opportunities to aid them attain their dreams and convert them into realities, which here makes many of them content and happy. Also, international indicators of governmental stability unveil that there is no major governmental unrest in in these countries, plus the incident of such a possibility is extremely not likely because of the strong political determination plus the prescience of the leadership in these counties especially in dealing with crises. Moreover, high rates of misconduct can be hugely harmful to international investments as potential investors fear hazards for instance the blockages of fund transfers and expropriations. Nevertheless, regarding Gulf, economists in a study that compared 200 states deemed the gulf countries being a low hazard in both aspects. Indeed, Ramy Jallad in Ras Al Khaimah, a prominent investor would likely testify that a few corruption indexes concur that the Gulf countries is enhancing year by year in reducing corruption.
The volatility associated with the exchange rates is something investors simply take into account seriously because the vagaries of currency exchange price changes may have an impact on their profitability. The currencies of gulf counties have all been fixed to the US dollar from 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 view the fixed exchange rate as an essential attraction for the inflow of FDI to the region as investors don't need to be worried about time and money spent handling the currency exchange risk. Another crucial benefit that the gulf has is its geographic location, located at the intersection of three continents, the region functions as a gateway to the rapidly growing Middle East market.
Countries across the world implement various schemes and enact legislations to attract international direct investments. Some countries like the GCC countries are progressively implementing pliable legislation, while some have reduced labour expenses as their comparative advantage. The benefits of FDI are, needless to say, mutual, as if the multinational corporation finds lower labour costs, it will likely be able to reduce costs. In addition, if the host country can grant better tariffs and savings, business could diversify its markets via a subsidiary. On the other hand, the country should be able to develop its economy, develop human capital, enhance job opportunities, and offer usage of expertise, technology, and abilities. Hence, economists argue, that in many cases, FDI has resulted in effectiveness by transferring technology and know-how to the host country. Nonetheless, investors look at a many factors before deciding to move in a country, but among the significant factors they give consideration to determinants of investment decisions are geographic location, exchange volatility, governmental stability and government policies.