The GCC economic outlook in the coming decade

The GCC economic outlook in the coming decade

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As countries around the world make an effort to attract foreign direct investments, the Arab Gulf stands apart as a strong potential destination.

Countries across the world implement different schemes and enact legislations to attract foreign direct investments. Some countries for instance the GCC countries are increasingly adopting flexible laws, while some have actually cheaper labour costs as their comparative advantage. The benefits of FDI are, needless to say, mutual, as if the multinational organization finds reduced labour expenses, it's going to be in a position to reduce click here costs. In addition, in the event that host state can give better tariffs and savings, the company could diversify its markets by way of a subsidiary branch. On the other hand, the state will be able to develop its economy, cultivate human capital, enhance employment, and provide access to knowledge, technology, and skills. Hence, economists argue, that most of the time, FDI has resulted in efficiency by transferring technology and know-how towards the country. Nevertheless, investors look at a many aspects before deciding to move in new market, but among the list of significant factors that they give consideration to determinants of investment decisions are geographic location, exchange fluctuations, political security and governmental policies.

To examine the suitableness of the Persian Gulf being a destination for foreign direct investment, one must evaluate if the Arab gulf countries provide the necessary and adequate conditions to promote FDIs. One of the consequential aspects is political security. Just how do we assess a state or even a area's stability? Political security will depend on to a significant extent on the content of residents. People of GCC countries have a lot of opportunities to simply help them attain their dreams and convert them into realities, making many of them content and grateful. Additionally, international indicators of governmental stability show that there is no major governmental unrest in the area, and the incident of such an scenario is highly unlikely given the strong governmental determination and the farsightedness of the leadership in these counties particularly in dealing with political crises. Furthermore, high rates of corruption can be hugely harmful to foreign investments as investors fear risks such as the obstructions of fund transfers and expropriations. But, regarding Gulf, political scientists in a study that compared 200 counties classified the gulf countries being a low hazard in both aspects. Indeed, Ramy Jallad in Ras Al Khaimah, a prominent investor would likely attest that several corruption indexes concur that the region is improving year by year in reducing corruption.

The volatility of the exchange rates is one thing investors just take into account seriously because the vagaries of exchange price fluctuations may have a visible impact on the profitability. The currencies of gulf counties have all been pegged to the United States dollar since the late 1990s and early 2000s, and investors such Farhad Azima in Ras Al Khaimah and Oussama el-Omari in Ras Al Khaimah would likely view the pegged exchange rate as an crucial seduction for the inflow of FDI in to the country as investors do not need to worry about time and money spent handling the currency exchange risk. Another essential benefit that the gulf has is its geographic position, located on the crossroads of Europe, Asia, and Africa, the region functions as a gateway towards the rapidly growing Middle East market.

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