Evaluating the suitability of Arab countries for foreign direct investment

Evaluating the suitability of Arab countries for foreign direct investment

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As countries around the globe attempt to attract international direct investments, the Arab Gulf stands apart being a strong potential destination.

To look at the suitableness regarding the Arabian Gulf being a location for international direct investment, one must evaluate if the Arab gulf countries give you the necessary and sufficient conditions to promote FDIs. Among the consequential factors is governmental stability. How can we evaluate a country or even a region's stability? Governmental stability will depend on to a significant degree on the satisfaction of residents. Citizens of GCC countries have a lot of opportunities to help them attain their dreams and convert them into realities, helping to make many of them content and happy. Moreover, global indicators of political stability show that there is no major political unrest in the region, and check here also the incident of such an scenario is very unlikely because of the strong governmental determination and the prudence of the leadership in these counties specially in dealing with political crises. Moreover, high rates of corruption can be hugely harmful to foreign investments as potential investors dread hazards like the blockages of fund transfers and expropriations. However, in terms of Gulf, specialists in a study that compared 200 states classified the gulf countries as being a low risk in both categories. Certainly, Ramy Jallad in Ras Al Khaimah, a prominent investor may likely attest that several corruption indexes confirm that the region is increasing year by year in cutting down corruption.

Nations all over the world implement different schemes and enact legislations to attract international direct investments. Some countries for instance the GCC countries are increasingly embracing flexible laws, while others have cheaper labour expenses as their comparative advantage. The benefits of FDI are, needless to say, mutual, as if the multinational corporation discovers reduced labour expenses, it will likely be in a position to reduce costs. In addition, if the host state can grant better tariffs and savings, the company could diversify its markets by way of a subsidiary branch. Having said that, the state should be able to grow its economy, develop human capital, increase job opportunities, and offer usage of knowledge, technology, and skills. Hence, economists argue, that in many cases, FDI has generated efficiency by transferring technology and knowledge towards the host country. Nonetheless, investors look at a many factors before carefully deciding to move in new market, but among the list of significant factors that they think about determinants of investment decisions are geographic location, exchange volatility, governmental stability and government policies.

The volatility of the currency rates is one thing investors simply take into account seriously due to the fact vagaries of currency exchange rate changes might have a visible impact on the profitability. The currencies of gulf counties have all been pegged to the US currency from 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 see the fixed exchange price being an important seduction for the inflow of FDI into the country as investors don't have to be worried about time and money spent manging the currency exchange risk. Another crucial advantage that the gulf has is its geographic location, located on the crossroads of three continents, the region functions as a gateway towards the quickly growing Middle East market.

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