Some Arab states have already dedicated ministries or organisations for the promotion of investments and eliminating whatever difficulties that may face investors.
Lo’ai BatainEh –
Attracting foreign investments and providing investors with the conducive milieu have been and are still among the hot issues for any conversation among critics and analysts especially these days were the foreign investment levels have recorded unprecedented low levels.
The Arab and Gulf countries are seriously considering the reasons behind this downward movement in order to take necessary corrective measures that bring investors and investment back to Arab states. Many initiatives have been done to enhance confidence of investors from the different parts of the world.
It should be noted that the share of Arab countries from the total investment flows is low compared to their abundant natural resources and high quality infrastructure especially in the GCC states.
Foreign direct investment (FDI) flows to the Arab states is still low with many of the Arab states failing to attract the investments they seek.
As per the report on the investment environment in the Arab states 2016, which was issued by the Arab Organization for Investment Guarantee and Export Credit, the FDI flow to the Arab states declined by 10 per cent from $44.3 billion in 2014 to $40 billion in 2015 with the FDI flow level remaining at humble rates compared to their record level in 2008 ($96.3 billion). Arab countries’ import constituted 2.3 per cent of the global GDP, estimated at $1.76 trillion and 5.2 per cent of the GDP of the developing countries ($765 billion).
The share of the Arab countries in the world flows has been fluctuating. The share increased remarkably from 0.4 per cent in 2000 to 6.6 per cent in 2009; the record level it reached. It decreased once again to 3.2 per cent in 2013 as the average between 2000 and 2015 staying at about 3.5 per cent.
While many Arab countries have already introduced reforms to improve the investment environment, still many impediments hamper the growth of FDI flows to the Arab countries.
Many studies have been made to identify the challenges and impediments facing investors to iron them out. Many of these challenges are now known by heart to most economic decision makers, analysts and critics. Some Arab states have already dedicated ministries or organisations for the promotion of investments and eliminating whatever difficulties that may face investors.
Although many countries have sought to improve business environment by providing investors with scores of incentives and guarantees, still the FDI flows are below the prospective level due to the many legal, legislative and administrative challenges which include but not limited to:
n Legislative challenges — The laws, regulations and practices at many Arab countries are still below level. Low maturity of these legislation will have negative effects on the interests of investors .
n Lack of confidence by investors, restrictions on land freehold, capital gains transfer, mandating foreign investors to have local partner and improper nationalisation of many jobs and profession. These challenges limit the utilisation of the available investment opportunities.
n Red tape and sophistication in processing transactions.
n Difficulty in getting permits and licenses from public organisations.
n Lack of transparency.
n Lack of preferred land spaces near the ports, airports and highways and if they are available, they are offered at non-attractive prices.
n Lack of quality infrastructure in some countries which may increase operational costs.
n Lack of banking facilities.
n Lack of clarity about tax exemption with some tax exemption unsustainable. The exemptions are not linked in a way that attract more investments especially to export-oriented industries. The lack of skills at the custom departments and public organisation add to the burden facing investors from red tape.
n Lack of clarity in the labour law, difficulty in getting recruitment visas and labour permit.
n Instability of the foreign exchange rates especially in the countries that have floated their currencies against the foreign currencies.
To put it in a nutshell, investors face many impediments including but not limited to lack of clarity by some Arab governments about FDI, lack of foreign currency in the local market and the deprecation of some Arab currencies which has great effect on the real value of investments valuated in foreign currencies and on investors’ profits when transferred outside the country.
Many press agencies published statements by one of the foreign ambassadors to an Arab country at the end of his saying “the government policies discourage investment and cannot attract foreign investments.”
He added that many businessmen from his country failed to start cooperation and investment relations despite the fact that his government was encouraging investors to invest in the country he was serving as ambassador.
He also noted that some other governments managed to attract 3000 companies and 300,000 businessmen and traders from his home country although his government did not encourage them to go there.