Middle East Investment

Sweden has a sophisticated economy focused on exports that is expanding quickly because to improved development in several industrial sectors. It earned $159 billion in export revenue in 2015. (Unegbu and Okanlawon 39). The industries of forestry, hydropower, and iron ore contribute to the economy's ongoing expansion. Germany, the United Kingdom, Denmark, and the United States are its top export trading partners. They mostly export machinery, cars, paper products, iron and steel products, chemicals, and weapons for the military. In addition to investing directly abroad, Swedish nationals also do so in Sweden, as in the case of foreign direct investment. FDI refers to an investment in the form of control ownership in business in a foreign country by an entity based in a different country FDI is a vital factor in economic development (Unegbu and Okanlawon 39). Host countries are striving to develop a favorable environment for FDI as it does not only offer advantage to the home country, but it also benefits the host country regarding creating jobs. Looking into FDI environment in Saudi Arabia, the government is primarily taking a frontier role in promoting FDI through the Saudi Arabian General Investment Authority (SAGIA). This body is more involved in supporting small and medium size businesses in Saudi Arabia. Usually, all foreign investment projects are imperatively required obtain trade license. SAGIA has set up an investor’s service center which provides licenses to foreign companies with 30 days of receiving the application, provide support service to investment projects and offers detailed information regarding the project.

FDI environment in United Arab Emirate is continually becoming better, and it is most prominent for foreign investment. Investors here are most confident especially because Dubai has the right to host Expo 2020. The government is promoting the private sector, and also it is opening up trade areas in line with WTO obligations (Unegbu and Okanlawon 45). There is a change in investment laws and regulations which aim at making UAE more conducive to foreign investment. It is much open for FDI as it is considered to be a long-term economic plan.

FDI in Qatar follows an upward trend. The government aims at becoming the leading in business and foreign investment environment. In 2000, the government amended FDI laws governing legal and economic environment. There is political stability, and this is a major factor that attracts foreign investors. Furthermore, the currency is stable and pegged to the US dollar. The infrastructures such as road, housing, and transport networks are all of a high quality. Above all, it has a corporate tax of ten percent which is more transparent. Also, rationalizing import duty structure and reducing tariff rates on imports so as to comply with World Health Organization standards. The financial sector is internationally competitive.

Currency analysis

Qatar currency is Qatari Riyal pegged to the US dollar, and that of Saudi Arabia is the Saudi Riyal. And it is mainly converted to the Indian rupee. UAE currency is Dirham, and also Indian rupee is the famously converted currency to dirham (Haksoon 50). The Qatar currency is stronger than both the Dirham and Riyal. Hence, it means that the inflation level is low. In this paper, it is evident that the inflation in Qatar is always low if compared to that of industrialized sectors. The inflation rates have been shooting up in Saudi Arabia since 2010, thus making the currency weaker. In UAE Abu Dhabi inflation is being projected to rise, from 1.7% to 2.8% again making the monetary value to go down.

Political and economic challenges

The United Arabs Emirates government is actively trying to eliminate corruption which has been a problem for many years. It is a challenge that many companies are finding difficulties to get Visas and other formalities done for their staffs. Moreover, the human capital does not have enough skills, and it is, therefore, hard to get the skilled human resource, and this makes an investor end up spending a substantial amount of funds to train new workers (Unegbu and Okanlawon 45).. The UAE face economic challenges such as inadequate economic diversification, subtle water supplies, low oil prices and high dependence on foreign labor.

Saudi Arabia’s political government faces the threat of violent extremist groups that focuses on diminishing the Kingdom currently and in the future. The increased competition from US and Russia negatively impacts the growth of its economy as it leads to a reduction in the market share of its exports. Other challenges include the increased power struggles, unequal distribution of wealth, high unemployment rates and security threats.

Over the past years, Qatar has been a peaceful nation due to its political stability. However, the current political reforms, tribal and religious structures pose a great political challenge. It also faces the problem of balancing the regional and internal stability. The main economic challenge facing Qatar is the decreased oil prices and failure of the government to tie the public expenditure to the fluctuating hydrocarbons revenue.

Legal and cultural challenges

Four federal laws are affecting FDI namely, Company Laws, Commercial Agency Laws, the industry laws, and the government tender laws. The company law asserts that every company established UAE are required to have51% national ownership (Unegbu and Okanlawon 39).. The non-tariffs barriers to investment are in the form of restrictive agency, sponsorship and distributorship requirements. The EAU faces the threat of social change and Emiratisation which negatively impacts its native culture regarding the distribution of oil wealth by the government to its citizenry thus distorting the labor market. The country also has a challenge in fostering its indigenous human capital to ensure its vision is sustainable.

Qatar’s changes in its local regulatory and legal landscape pose risks such as fear of foreign investment, increased rate of tax and high number of obligations when reporting. Moreover, the Swedish and the inhabitants of Qatar significantly varies. For instance, people from Sweden considers sharing and value love for each other unlike the people in Qatar who are demarcated based on the economic status. This difference will, however, hinder the smooth execution of business, but the management investors have to invest in the research to cope up with these cultural variations.

The unprecedented challenges in the legal system, especially in the Insurance Authority, deter the foreign direct investment as well the laws that prevent women from participating in some areas of the labor force is a significant threat. There is also non-accessibility of regulatory materials in various jurisdictions when foreign investors need them. The culture of religious extremist to control the youths personal life, education and entrepreneurial is a high threat to the whole nation as it does not encourage workforce diversity. The culture that women should not leave their homes without being accompanied by a man challenges their participation in economic growth activities.

Market entry strategy

From the above discussions regarding foreign direct investment, currency analysis and the political, economic, legal and cultural challenges it is quite evident that the three countries are similar in foreign investments. Market entry strategy refers to any planned method of delivering goods or services to a new target market and distributing them (Haksoon 56). Therefore, it is rational to choose licensing approach as the appropriate market strategy because the manager wants to invest in the Middle East for a fixed period and also exclusively manufacture the product there. Licensing refers to an official permit or authority to do to the business in a particular area. It stipulates the way the business should be carried out (Haksoon 53). Normally the decision of making an international license agreement is dependent on the host government rules and regulations for intellectual property.

The benefits of this strategy include, first, the ability of the licensor to choose the right partner leads to a reduction in the competition amongst themselves in the market. Secondly, it is very flexible and can be customized to fit the needs and interests of both the licensor and licensee. Thirdly, it is easy to obtain technical know-how and services because they have the right to hire the host company’s skilled labor. Moreover, the licensee can expand quickly without using too much capital. Also, it paves the way for future investment. Finally, since the company is somewhat locally owned, the political risk is minimized sufficiently.

Conclusion

In conclusion, the foreign direct investment is an important way of expanding globally. Therefore, before choosing the country to invest indirectly, it is laudable that the manager conducts a full search on trade regulations, currency values customs and standards, economic and political environment, cultural analysis, and even the market opportunities.



























Works cited

Unegbu, A.O. and Okanlawon, A. “Direct Foreign Investment in Kurdistan Region of Middle East:” Non-Oil Sector Analysis. British Journal of Economics, Management & Trade, Vol. 6(1), 2015, p. 38-49.

Haksoon, K. “Political Stability and Foreign Direct Investment.” International Journal of Economics and Finance, Vol. 2, No. 3, 2010, p. 39-65.