GCC member-states will attract more foreign capital and investments over the coming period despite the financial crisis, a study said.
The study, "Components and tools of investment in GCC member-states", was compiled by Director, Research and Studies, GCC General Secretariat Najib Abdullah Al Shamsi.
It said the region with be among the most important areas of attraction for foreign investments, especially in the light of investment and economic agreements concluded between countries and regions of the world.
Also all member-states have joined the World Trade Organisation.
The study has identified opportunities of successful investment in four fields: petroleum and gas industries, traditional economic projects (marines, agricultural, food, drink, and mining industries), tourism and services.
It attributed the success of these investment fields to eight factors: political and security stability, advanced infrastructure, flexible economic policies, encouraging legislative and legal environment, investment deals, agreements banning dual tax, variety of free zones, privatisation trend and the high return on the capital.
The high return is supported by three elements: the GDP that is recording an increasing growth, population growth that forms the local demand for commodities and services produced and the consumption trend in GCC societies. Al Shamsi study said the GCC government sector sought to achieve structural economy reforms and to prepare the investment environment to encourage the private sector to play its role in the development process. And over the past five years, the governments boosted their economic policies in line with world trends in terms of giving the private sector, national and foreign, to seize opportunities available in the economy and to play its role in achieving development and boosting investments, especially in the light of giving the foreign investor the same treatment as that of the local counterpart in terms of privileges and incentives.
The study said GCC countries enjoy distinguished investments environments as well as promising investment opportunities that have encouraged the national capitals to survive and advance. The national capitals occupy a good place on the investment plan and have become a real competitor in other parts of the region and other countries in attracting foreign investments.
Add to this the infrastructure on which GCC governments have spent hundreds of billions of dollars, making it a fertile environment for Arab and other investors.
The study said GCC economies witnessed record growth over the past five years, especially in the past three years.
In 1998-2002, the gross domestic product of GCC member-states scored 2.5 per cent growth, while it rose in the three following years to 5.8 per cent, 5.9 per cent and 6.8 per cent respectively. In 2007, it reached 6.4 per cent, according to IMF estimates.
This was due to the rise in oil prices and the development of the economic performance of other sectors, primarily that of transformational industries, real estate and financial services sectors because of a boost in government spending, which encouraged investment by the private sector in those sectors.
The accumulative GDP at current prices rose at record rates to $475.1 billion (Dh1.7 trillion) in 2004 from $404.6bn in 2003, to $615.2bn in 2005, and $714.8bn in 2006.
This was attributed to the rise in the price of crude from $35 in 2004 to $53 in 2005 and to $60 in 2006. This resulted in an increase of $300bn in oil revenues in 2005. The GCC balance of payments was $170bn in 2005, which was expected to reach $210bn by the end of 2008, according to IMF figures.
The study has specified opportunities for successful investment in four fields.
PETROLEUM AND GAS
Regarding petroleum and gas industries sector, the GCC owns 45 per cent of the world oil reserves (484 billion barrels) along with huge gas reserves, which account for 24 per cent of the global reserves (41,197 billion cubic metre). These big quantities of oil and gas confirm promising future horizons for national and foreign investments to set up oil exploration, refinery and distribution companies, especially as the region intends to enable the private sector to seize its opportunity in investment in different production and service sectors.
Therefore, national and foreign capitals and investments can set up companies related to oil industries and services along with mining, plastic, furniture and leather industries. In addition, industries depending on gas in terms of production, manufacturing and distribution can be established, as the cost of these industries in the GCC is low.
There are many investment activities that generate suitable revenues and are important in attaining food security for the region's population and their participation in the Gross Domestic Product.
Arabian Gulf, Arab Sea and Red Sea provide the GCC states with a good sea environment to establish many industries which depend on fishing and fish canning to meet the requirements of local market and for export.
Oman's success in exporting part of its fish reserves to Western Europe is evidence of the importance and profitability of investment in the sector.
AGRICULTURAL, FOOD AND BEVERAGE
The region is known for its fertile agricultural lands for planting a lot of agricultural products, such as vegetables and fruits, especially in Saudi Arabia, Oman and the UAE. This means the presence of good investment opportunities in the sector. Some food industries depending on agriculture proved to be successful, such as date factories in Saudi Arabia, Oman and the UAE. In addition, meat, dairy and chicken projects confirmed their profitability for investment.
These industries form promising opportunities for capitals. Some GCC states have long mountain series which could contain gold, silver, copper and lead metals, which can be discovered through conducting geological studies.
The GCC states enjoy a distinguished winter climate, great tourist areas, services and roads. These form essential components for the success of tourist industry representing good investment opportunities for capitals.
Promotional tourism industry and shopping and conference tourism shows these are factors that consolidated industry in the GCC states. The occupancy of high-quality hotels throughout the year underlines the importance of this industry. The investors can generate good returns on investment in hotels, resorts, tourist projects and travel companies.
As the GCC states plans to provide opportunities to the private sector, the sector has good investment opportunities in the services sector, which includes health services, telecom services, information technology, educational services and properties.
In addition, the financial and banking services sector forms a good opportunity for investment under the light of global interest in the Gulf and desire of other countries to expand their commercial and investment activity in the region. The region remains an attractive option for those seeking to invest in the service sector.
Credit policies make the region attractive
Credit policies adopted by GCC monetary authorities and commercial banks helped consolidate investment climate.
These polices also helped the commercial banks to direct their local banking credit to development projects and support the private sector in development process.
In addition, the presence of developed banking system in the GCC states as well as high local liquidity helped consolidate investment climate in the GCC states.
That enabled the private sector to get the finance necessary for its projects in competitive interest rates and flexible periods. The GCC monetary policy allows local investors to transfer the returns of their investments outside the region without restrictions.