A new report by The Economist Intelligence Unit has found that global investors are suspicious of putting their money into Gulf Cooperation Council countries, despite its member countries pursuing policies to attract investment and a rise in their global ease of doing business rankings.
Foreign investment has fallen in most of the six GCC states - Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates - 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," report editor Aviva Freudmann said.
"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."
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 notes 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.
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