Various nations across the world have actually implemented schemes and laws designed to invite international direct investments.
Nations all over the world implement various schemes and enact legislations to attract foreign direct investments. Some nations such as the GCC countries are progressively implementing flexible regulations, while others have cheaper labour costs as their comparative advantage. The advantages of FDI are, of course, mutual, as if the international corporation finds reduced labour costs, it is able to minimise costs. In addition, if the host state can grant better tariffs and savings, business could diversify its markets via a subsidiary. On the other hand, the state will be able to grow its economy, develop human capital, increase job opportunities, and provide access to expertise, technology, and abilities. Therefore, economists argue, that in many cases, FDI has resulted in efficiency by transmitting technology and knowledge to the host country. However, investors consider a myriad of factors before making a decision to invest in a state, but one of the significant factors they give consideration to determinants of investment decisions are location, exchange volatility, governmental security and governmental policies.
The volatility associated with exchange rates is something investors simply take into account seriously due to the fact unpredictability of exchange rate changes may have a visible impact on the profitability. The currencies of gulf counties have all been pegged to the United States 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 pegged exchange price being an important seduction for the inflow of FDI to the region as investors do not have to be worried about time and money spent handling the currency exchange uncertainty. Another crucial benefit that the gulf has is its geographical location, situated at the crossroads of Europe, Asia, and Africa, the region functions as a gateway to the rapidly raising Middle East market.
To look at the suitableness regarding the Arabian Gulf as being a destination for foreign direct investment, one must evaluate whether or not the Arab gulf countries provide the necessary and sufficient conditions to promote direct investments. One of the consequential factors is political stability. How do we evaluate a state or even a area's stability? Governmental security depends to a significant level on the satisfaction of citizens. People of GCC countries have . actually an abundance of opportunities to help them achieve their dreams and convert them into realities, helping to make many of them content and grateful. Moreover, global indicators of governmental stability reveal that there is no major political unrest in the region, and the occurrence of such a scenario is extremely not likely provided the strong governmental determination plus the prescience of the leadership in these counties specially in dealing with political crises. Moreover, high levels of corruption could be extremely harmful to foreign investments as potential investors fear risks including the blockages of fund transfers and expropriations. Nonetheless, when it comes to Gulf, political scientists in a study that compared 200 counties deemed the gulf countries as a low risk in both aspects. Certainly, Ramy Jallad in Ras Al Khaimah, a prominent investor would probably testify that several corruption indexes confirm that the GCC countries is enhancing year by year in cutting down corruption.