By Sam Bridge
2020 Milken Institute Global Opportunity Index says serious deficiencies exist in policies that ensure the protection of the investor
As Gulf nations ramp up efforts to attract investment and diversify their economies, they lag in critical areas that handicap their progress, according to the 2020 Milken Institute Global Opportunity Index.
The report comes in a pivotal year for the GCC as Saudi Arabia assumes the presidency of the G20 and Dubai hosts Expo 2020, highlighting the region’s growing economic development.
The Global Opportunity Index (GOI), published annually, considers economic and financial factors that influence foreign investment activities, as well as business, legal, and regulatory policies that governments use to drive investment.
Claude Lopez and Joseph Bendix, authors of the report, found that GCC countries compare favourably in several areas, including the cost of opening a business, the burden of labour regulation and taxes, the age and health of the working population.
But serious deficiencies exist in policies that ensure the protection of the investor - including the recovery and resolution process - and transparency regarding the quality and quantity of information available.
The authors studied the data in the context of public efforts by GCC countries to produce economic plans addressing barriers to future development, such as Saudi Vision 2030 or Bahrain’s Economic Vision 2030.
“The over-arching goal of these national plans is to diversify the economy away from oil by modernising the legislative framework and enhancing the business environment of the region,” the authors wrote, adding: “The credibility of these economic roadmaps, especially in the eyes of international investors, lies in their implementation.”
The index, which was topped by Hong Kong, ranked the UAE first in the region, and 26th globally, followed by Bahrain (42), Oman (53), Kuwait (58) and Saudi Arabia (66) out of 146 countries analysed on categories including Business Perception, Financial Services, Institutional Framework, Economic Fundamentals and International Standards and Policy.
In their analysis, the authors noted the significant progress made to date and the growing prominence of GCC countries among investors.
For example, they pointed to the inclusion of Kuwait, Qatar, Saudi Arabia, and the UAE in leading emerging market indices.
“This trend will help spotlight the region to global investors and funds. However, the inclusion in these global indices means extra scrutiny from investors and new challenges... especially information disclosure. The delays in Aramco’s IPO illustrate the importance of these components when dealing with international investors.”