Challenges remain for doing business in GCC

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EIU’s report on Business Environment in GCC Countries indicates quite a revelation even as the region continues to display positive economic trends

GCC Business environment
A UAE National in front of a Guitar shop in Dubai. Latest EIU report reveals that despite the economic boom, there are still a number of challenged in GCC’s business environment. (picture used for illustrative purposes only)

As country after country across the globe found itself plummeting from the pedestal of business and economic security, it looked as if the Middle Eastern countries – most specifically the GCC nations – were the exception to the global economic downturn.

The Economist Intelligence Unit’s survey report on Business Environment in Gulf Co-operation Council Countries however presents a different side to the booming GCC economic trends’ tale and highlights both positives and negatives in an equally stark manner.

The survey specifically indicates:

  • Most GCC countries, with the pointed exception of Kuwait, feature quite highly in the World Bank’s ‘Ease of Doing Business’ Survey with Saudi Arabia even featuring amongst the top 10 countries in 2011.
  • In the same survey for 2014, UAE came 23rd while Saudi Arabia was placed at 26th and Kuwait being placed the lowest at the 104th spot. According the EIU’s survey report, these differences between Kuwait and other GCC member nations indicate a high rate of disparity within the GCC itself.
  • Conversely, when the 2008 global economic recession hit FDI percentages across the globe, FDI percentages didn’t take a hit in Kuwait, Saudi Arabia and Qatar. While this was indeed a watershed occurrence for Saudi Arabia and Qatar, the comparative low percentage of FDIs in Kuwait was majorly due to the fact that the country doesn’t basically get much by way of FDI.
  • Interestingly, within the GCC nations themselves, ‘intra-investments’ increased with the IMF tabulating nearly 75% of investments by way of FDIs coming into Bahrain from its fellow GCC member countries in 2010 and nearly 80% of investments by way of FDIs coming into Kuwait from other GCC nations in 2011.
  • Likewise, though the GDP percentage continues to hover at above a stable four percentage across the GCC countries and there is almost 100% ease for foreign companies to establish their trade and commerce in several sectors in the region, on account of several restricting factors, several doubts still linger in the minds of global investors in terms of investing in these countries.
  • Contradictorily, even while the prospect of another Arab Spring potentially manifesting itself is causing foreign corporates to take a step back, several regions within the GCC have still emerged to be preferred as prime-time hubs for further expected developments. These include Dubai, Abu Dhabi, Qatar and to a certain extent even Saudi Arabia, which have by and large remained unruffled by the storm of protests making waves in other Middle Eastern countries.
  • There are also aspects about the disparities between the existence of rules and regulations and their enforcements that are a cause of worry despite the promising nature that the GCC countries otherwise pose to the ever-developing global economy.

The EIU survey also emphasises that while full-fledged governmental efforts have been employed in order to keep the economic momentum going in the region with regard to present economic activities’ diversification and even focusing on increasing the rate of employment of employable people in the country, the situation will not be easy to surmount and will need particularly driven measures by governmental authorities to ensure that these measures don’t end up being a stop-gap measure rather than bring long term economic bracing.

Aviva Freudmann, the editor of the EIU report has nicely summarised the GCC business environment by saying:

“The overall picture is one of uneven progress. On one level, investors are welcomed: the countries are open to foreign ownership and red tape on things like construction permits has been cut. But on another level, there are policies restricting foreign labour and widely varying business regulations, which can stall projects and growth. These two contrasting messages from GCC countries present a conundrum for investors.”

Photo-Michael Keith Manges/Flickr

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