As nations around the world make an effort to attract foreign direct investments, the Arab Gulf stands out as being a strong potential destination.
The volatility of the currency prices is something investors simply take seriously as the vagaries of exchange rate fluctuations could have a direct effect on their profitability. The here 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 may likely see the pegged exchange price as an essential seduction for the inflow of FDI into the country as investors do not need to worry about time and money spent handling the forex instability. Another essential advantage that the gulf has is its geographic position, located on the crossroads of three continents, the region serves as a gateway to the quickly growing Middle East market.
Countries across the world implement different schemes and enact legislations to attract international direct investments. Some nations like the GCC countries are increasingly embracing flexible laws, while some have actually reduced labour expenses as their comparative advantage. The benefits of FDI are, needless to say, shared, as if the multinational company discovers reduced labour expenses, it will be in a position to reduce costs. In addition, in the event that host state can grant better tariffs and savings, the business could diversify its markets through a subsidiary. Having said that, the country should be able to develop its economy, cultivate human capital, increase job opportunities, and provide usage of expertise, technology, and skills. Hence, economists argue, that most of the time, FDI has generated efficiency by transferring technology and know-how towards the host country. Nonetheless, investors look at a myriad of aspects before making a decision to invest in a country, but among the significant factors that they give consideration to determinants of investment decisions are geographic location, exchange fluctuations, political stability and government policies.
To look at the suitableness of the Persian Gulf as a location for foreign direct investment, one must evaluate if the Arab gulf countries give you the necessary and sufficient conditions to encourage direct investments. One of the consequential variables is governmental security. How can we evaluate a country or even a area's security? Political stability will depend on to a large degree on the satisfaction of individuals. Citizens of GCC countries have actually plenty of opportunities to simply help them attain their dreams and convert them into realities, helping to make many of them satisfied and happy. Additionally, global indicators of political stability show that there is no major governmental unrest in the region, and also the occurrence of such an eventuality is very not likely given the strong governmental determination as well as the prudence of the leadership in these counties particularly in dealing with political crises. Moreover, high rates of corruption can be hugely detrimental to foreign investments as investors dread hazards including the obstructions of fund transfers and expropriations. However, in terms of Gulf, experts in a study that compared 200 states categorised the gulf countries being a low risk in both categories. Indeed, Ramy Jallad in Ras Al Khaimah, a prominent investor may likely testify that several corruption indexes concur that the Gulf countries is improving year by year in eradicating corruption.