As nations across the world make an effort to attract international direct investments, the Arab Gulf stands apart as a strong possible destination.
Countries around the globe implement various schemes and enact legislations to attract international direct investments. Some nations like the GCC countries are progressively embracing flexible legislation, while others have actually lower labour expenses as their comparative advantage. The many benefits of FDI are, needless to say, shared, as if the international firm finds reduced labour costs, it is in a position to reduce costs. In addition, if the host country can give better tariffs and savings, the business could diversify its markets through a subsidiary. Having said that, the state will be able to develop its economy, cultivate human capital, increase job opportunities, and provide usage of expertise, technology, and skills. Thus, economists argue, that most of the time, FDI has resulted in effectiveness by transferring technology and knowledge towards the country. However, investors consider a myriad of factors before carefully deciding to move in new market, but one of the significant variables they think about determinants of investment decisions are geographic location, exchange fluctuations, political stability and government policies.
To look here at the viability of the Gulf being a location for international direct investment, one must assess if the Arab gulf countries provide the necessary and adequate conditions to promote direct investments. Among the important variables is governmental stability. How can we assess a state or perhaps a region's security? Governmental security depends up to a significant level on the content of citizens. Citizens of GCC countries have a great amount of opportunities to help them achieve their dreams and convert them into realities, making many of them satisfied and grateful. Also, worldwide indicators of governmental stability unveil that there has been no major governmental unrest in in these countries, and the occurrence of such an eventuality is highly unlikely because of the strong political will as well as the prudence of the leadership in these counties specially in dealing with crises. Furthermore, high rates of corruption could be extremely harmful to foreign investments as investors fear hazards like the blockages of fund transfers and expropriations. But, in terms of Gulf, specialists in a study that compared 200 states classified the gulf countries as a low hazard in both categories. Certainly, Ramy Jallad in Ras Al Khaimah, a prominent investor would probably attest that several corruption indexes confirm that the region is improving year by year in cutting down corruption.
The volatility of the currency prices is one thing investors simply take into account seriously as the vagaries of exchange price changes could have a visible impact on their profitability. The currencies of gulf counties have all been fixed to the US currency since the late 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 rate as an important seduction for the inflow of FDI into the region as investors do not need to be concerned about time and money spent manging the foreign exchange instability. Another crucial benefit that the gulf has is its geographic location, located on the intersection of Europe, Asia, and Africa, the region serves as a gateway towards the rapidly raising Middle East market.