Assessing the suitability of Arab countries for foreign direct investment

Assessing the suitability of Arab countries for foreign direct investment

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As nations around the globe make an effort to attract international direct investments, the Arab Gulf stands apart being a strong potential destination.

The volatility associated with exchange rates is something investors simply take into account seriously since the vagaries of currency exchange price fluctuations might have an impact on the profitability. The currencies of gulf counties have all been pegged to the US dollar 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 pegged exchange price as an important seduction for the inflow of FDI in to the region as investors do not need to be worried about time and money spent manging the currency exchange uncertainty. Another important benefit that the gulf has is its geographic location, located at the intersection of Europe, Asia, and Africa, the region functions as a gateway towards the quickly raising Middle East market.

To look at the suitableness of the Gulf as being a location for foreign direct investment, one must assess if the Arab gulf countries give you the necessary and adequate conditions to encourage direct investments. One of the important criterion is governmental security. Just how do we assess a state or perhaps a area's security? Political security depends to a large degree on the content of people. People of GCC countries have plenty of opportunities to simply help them achieve their dreams and convert them into realities, which makes most of them content and grateful. Additionally, global indicators of political stability show that there's been no major political unrest in the area, as well as the occurrence of such a eventuality is extremely unlikely given the strong political determination and the prudence of the leadership in these counties specially in dealing with crises. Moreover, high levels of misconduct can be hugely detrimental to international investments as potential investors fear risks for instance the blockages of fund transfers and expropriations. However, when it comes to Gulf, economists in a study that compared 200 states classified the gulf countries being a low hazard in both categories. Certainly, Ramy Jallad in Ras Al Khaimah, a prominent investor would likely attest that a few corruption indexes concur that the GCC countries is increasing year by year in eliminating corruption.

Nations across the world implement different schemes and enact legislations to attract international direct investments. Some countries like the GCC countries are increasingly adopting pliable legislation, while others have reduced labour costs as their comparative advantage. The benefits of FDI are, needless to say, mutual, as if the multinational company finds reduced . labour expenses, it's going to be able to cut costs. In addition, if the host country can grant better tariffs and savings, the company could diversify its markets through a subsidiary branch. On the other hand, the state should be able to grow its economy, cultivate human capital, increase job opportunities, and provide usage of expertise, technology, and abilities. Thus, economists argue, that in many cases, FDI has led to efficiency by transferring technology and know-how to the country. Nevertheless, investors think about a many aspects before deciding to invest in new market, but among the list of significant factors that they consider determinants of investment decisions are geographic location, exchange volatility, political security and government policies.

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