Global investors remain suspicious of Gulf Co-operation Council countries, according to a new report by The Economist Intelligence Unit.
The report found that this was despite many of its member countries pursuing policies to attract investment and a rise in their global ‘ease of doing business’ rankings.
The business environment in Gulf Co-operation Council countries, sponsored by Merck Serono, looks at investor attitudes towards the GCC’s six member countries – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.
Foreign investment has fallen in most GCC states since the global financial crisis in 2008-09, both in absolute terms and as a percentage of GDP. This is despite the introduction of policies to encourage foreign investment.
“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,” Aviva Freudmann, the editor of the report, said.
The Arab Spring has focused the attention of GCC policymakers on high youth unemployment. The report concludes that policies to promote local employment are considered necessary to prevent social and political unrest and are likely to continue.
The report also noted that GCC governments’ tendency to buy their way out of trouble by subsidising citizens directly and indirectly could stifle entrepreneurial initiatives, maintaining state-led economies in the region.