As countries around the world make an effort to attract international direct investments, the Arab Gulf stands apart as being a strong possible destination.
The volatility regarding the exchange rates is something investors simply take into account seriously due to the fact unpredictability of currency exchange price changes might have an effect on their profitability. The currencies of gulf counties have all been fixed to the US dollar from 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 fixed exchange price being an crucial attraction for the inflow of FDI to the region as investors do not have to worry about time and money spent manging the currency exchange instability. Another essential benefit that the gulf has is its geographical location, situated at the crossroads of three continents, the region functions as a gateway towards the quickly growing Middle East market.
Nations all over the world implement different schemes and enact legislations to attract international direct investments. Some nations such as the GCC countries are increasingly implementing flexible laws, while others have cheaper labour costs as their comparative advantage. The benefits of FDI are, of course, shared, as if the international organization discovers reduced labour expenses, it will be able to reduce costs. In addition, if the host country can grant better tariffs and savings, the business enterprise could diversify its markets via a subsidiary. On the other hand, the state should be able to grow its economy, cultivate human capital, enhance employment, and offer access to expertise, technology, and skills. Therefore, economists argue, that most of the time, FDI has led to efficiency by transferring technology and know-how towards the country. However, investors consider a many aspects before deciding to move in a state, but among the significant factors which they consider determinants of investment decisions are geographic location, exchange fluctuations, governmental security and government policies.
To examine the suitability of the Persian Gulf as being a location for foreign direct investment, one must assess if the Arab gulf countries provide the necessary and adequate conditions to promote FDIs. One of many important elements is political stability. How do we evaluate a state or even a region's stability? Governmental security depends to a large extent on the content of inhabitants. Citizens of GCC countries have actually a good amount of opportunities to aid them achieve their dreams and convert them into realities, which makes most of them content and grateful. Furthermore, global indicators of governmental stability unveil that there has been no major political unrest in the region, and also the occurrence of such a scenario is extremely not likely provided the strong political determination and also website the farsightedness of the leadership in these counties particularly in dealing with crises. Moreover, high levels of misconduct could be extremely harmful to international investments as potential investors fear risks for instance the blockages of fund transfers and expropriations. Nevertheless, regarding Gulf, economists in a study that compared 200 counties deemed the gulf countries as being a low risk in both categories. Indeed, Ramy Jallad in Ras Al Khaimah, a prominent investor may likely attest that a few corruption indexes concur that the region is improving year by year in eliminating corruption.