As nations around the world strive to attract international direct investments, the Arab Gulf stands out as a strong prospective destination.
Nations across the world implement different schemes and enact legislations to attract international direct investments. Some nations such as the GCC countries are progressively implementing pliable regulations, while some have lower labour expenses as their comparative advantage. Some great benefits of FDI are, needless to say, shared, as if the multinational firm finds lower labour costs, it will be able to minimise costs. In addition, in the event that host state can grant better tariffs and savings, the company could diversify its markets through a subsidiary. On the other hand, the country should be able to develop its economy, develop human capital, increase employment, and provide usage of knowledge, technology, and skills. Therefore, economists argue, that oftentimes, FDI has generated efficiency by transferring technology and know-how to the host country. Nonetheless, investors look at a many aspects before making a decision to move in a state, but among the significant factors which they consider determinants of investment decisions are location, exchange volatility, political security and governmental policies.
The volatility regarding the exchange prices is something investors just take seriously as the vagaries of currency exchange price changes could have an effect on their profitability. The currencies of gulf counties have all been fixed to the United States currency since 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 being an important seduction for the inflow of FDI into the region as investors don't have to worry about time and money spent handling the foreign exchange risk. Another essential advantage that the gulf has is its geographical location, situated at the crossroads of three continents, the region functions as a gateway towards the quickly raising Middle East market.
To examine the viability of the Arabian Gulf as a destination for foreign direct investment, one must assess whether the Arab gulf countries provide the necessary and adequate conditions to encourage FDIs. One of the important elements is governmental stability. How do we assess a state or perhaps a region's stability? Governmental stability will depend on up to a significant extent on the satisfaction of citizens. Citizens of GCC countries have a lot of opportunities to help them achieve their dreams and convert them into realities, which makes many of them satisfied and grateful. Furthermore, international indicators of governmental stability unveil that there . has been no major political unrest in the area, plus the incident of such a possibility is extremely unlikely given the strong governmental determination and also the vision of the leadership in these counties specially in dealing with crises. Moreover, high rates of corruption can be extremely harmful to international investments as investors fear risks including the obstructions of fund transfers and expropriations. Nevertheless, regarding Gulf, economists in a study that compared 200 states categorised the gulf countries as a low hazard in both categories. Indeed, Ramy Jallad in Ras Al Khaimah, a prominent investor would likely testify that a few corruption indexes make sure the region is improving year by year in eliminating corruption.