As nations around the globe attempt to attract foreign direct investments, the Arab Gulf stands apart as a strong potential destination.
The volatility associated with currency prices is one thing investors simply take into account seriously due to the fact unpredictability of exchange rate fluctuations may have an impact on the profitability. The currencies of gulf counties have all been pegged to the US dollar since 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 view the fixed exchange price as an important seduction for the inflow of FDI to the region as investors don't have to be concerned about time and money spent handling the currency exchange uncertainty. Another essential benefit that the gulf has is its geographical position, situated on the crossroads of three continents, the region serves as a gateway to the rapidly growing Middle East market.
Countries around the globe implement various schemes and enact legislations to attract foreign direct investments. Some countries like the GCC countries are increasingly embracing flexible regulations, while some have reduced labour expenses as their comparative advantage. The many benefits of FDI are, needless to say, mutual, as if the international firm finds lower labour costs, it will be able to cut costs. In addition, if the 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 grow its economy, cultivate human capital, increase employment, and provide usage of knowledge, technology, and abilities. Therefore, economists argue, that most of the time, FDI has resulted in efficiency by transmitting technology and knowledge to the host country. Nonetheless, investors think about a numerous aspects before carefully deciding to invest in a country, but one of the significant factors they give consideration to determinants of investment decisions are position on the map, exchange fluctuations, political stability and governmental policies.
To examine the viability regarding the Gulf as a location for foreign direct investment, one must evaluate if the Arab gulf countries provide the necessary and sufficient conditions to promote FDIs. Among the important elements is political security. Just how do we evaluate a state or even a area's security? Governmental security depends up to a significant level on the content of inhabitants. People of GCC countries have lots of opportunities to aid them achieve their dreams and convert them into realities, which makes a lot website of them content and grateful. Additionally, global indicators of governmental stability show that there is no major governmental unrest in the region, plus the incident of such an scenario is extremely unlikely because of the strong political determination and also the prudence of the leadership in these counties especially in dealing with crises. Moreover, high levels of corruption can be hugely harmful to foreign investments as investors dread hazards like the blockages of fund transfers and expropriations. However, regarding Gulf, specialists in a study that compared 200 counties classified the gulf countries being a low danger in both categories. Indeed, Ramy Jallad in Ras Al Khaimah, a prominent investor would probably testify that a few corruption indexes confirm that the region is improving year by year in eradicating corruption.