by SAL:
Forrest, Joe Schmoe, or whatever name you would call that everyday person who came to the Arabian Gulf in search for a high paying job, extravagant life, and quick promotional ladder; quick transformation from the rags to riches in a year, or maybe two, and ask the rhetorical question. Am I full yet? Well, the emotional side of Forest has been given enough media coverage in previous months and is not the subject of our discussion today.
In this article, Forrest is not only that expatriate, but also his spending habits and the huge cash inflow that came with it. As the economic downturn took its toll on the region, FDI inflow started to shrink and investor confidence in the region started to deteriorate, in concourse with the economy.
The move to economic liberalization in the GCC coupled with the region’s strong economic prospects, surging oil prices, and improved regulatory environment attracted foreign investors to participate and deploy money. In fact, between 2005 and 2007 alone, FDI were 33% higher than their accumulated total over the last fifteen years or more than eight times the FDI flow into the GCC during the previous nine years!
The huge inflow of cash brought with it new expertise and managerial know-how to build and establish financial centers throughout the region. While national and regional barriers such as restrictions on ownership for foreign investors, rigidity of labor laws, lack of transparency and information sharing mechanisms limited FDI; they never seemed to reduce them. However, after reaching an all-time high of $1,979 billion in 2007, FDI inflows declined by 14.2% to $1,697 billion following the global economic crisis. FDI inflow to the GCC is expected to take a hit in 2009 that might even continue to 2010. Investor confidence has deteriorated in 2009 with a ripple effect that started with the political impasse in Kuwait and default of the two main leading investment firms Global Investment House KSCC and Investment Dar. The default of Ahmad Hamad Algosaibi & Brothers Co. and Saad Group in Saudi Arabia, and finally Dubai World projects have been delayed or suspended and is seeking a “standstill” agreement with creditors. With the delay and cancelation of projects, lack of transparency, tightening liquidity, tumbling real estate prices, and low investor confidence; How will money be attracted back into the region?
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Loading ...Tags: FDI Inflows, finance, GCC, Kuwait, Saudi
