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03 October 2023

Red tape hinders investments in GCC

By Nadim Kawach


Gulf Arab states continue to face bureaucratic red tape, a lack of incentives and other major obstacles while trying to attract investment despite measures to tear down barriers to foreign capital, according to a regional survey.

Scores of companies polled about investment barriers in the six-nation Gulf Co-operation Council (GCC) said investors still find it difficult to set up businesses in the oil-rich region although some member countries had announced measures to ease restrictions in this field.

One major barrier involved policy discrimination against foreign investors, especially in the provision of services. The survey covered 89 companies in the UAE, Saudi Arabia, Kuwait, Bahrain, Oman and Qatar and was conducted by the Dammam-based Federation of the GCC Chambers of Commerce and Industry (FGCCI).

It was obtained by Emirates Business at a GCC bourse conference in Abu Dhabi yesterday.
Bureaucratic red tape, a lack of incentives and project protection, the absence of transparency and effective intellectual property legislations, strict job nationalisation policies, and the absence of a clear strategy for privatisation in member states were cited among the major investment barriers in the region, according to the survey.

Most of the polled companies also told of long delays in obtaining visas for workers and licences for projects as well as difficulty in finding places at industrial zones.

Many of them also spoke about lack of information from local companies about investment opportunities and economic policies in other member countries.

The survey covered five main fields procedural obstacles, legislative and organisational obstacles, economic policy obstacles, infrastructure problems and inter-GCC investment barriers. Each field included several sub-categories.

Statistical tables included in the survey, the first major opinion poll on investment impediments in the GCC, showed bureaucracy was among the worst barrier for investment in member states as it was classified a “very big obstacle”.
The same classification was also given to the lack of a competent investment authority, while a “big obstacle” classification was given to other categories in the procedural field, including the difficulty of obtaining licences and registration for projects and for work visas, as well as long delays in procedures at border outlets and export-import facilities and services.
In the legislative and organisational field, poor arbitration systems, the absence of legislation governing competition, lack of protection of investments, low transparency in some systems and the lack of a proper mechanism for questioning competent authorities were found to be “very big obstacles”.

Lack of effective intellectual and copyright laws was found to be a “big obstacle”, while inconvenience of organisational legislations was a “medium obstacle”.

In the economic policy field, a “very big obstacle” was given to what the survey termed as the poor participation of the private sector in economic decision-making, lack of a clear strategy to develop small enterprises, the absence of emphasis on the technical side and a shortage of skilled labour.

Poor incentives, strict job nationalisation conditions, the lack of clear privatisation strategy and shortages in financing sources were found to be big obstacles.

A “medium obstacle” classification was given to the taxation system.

The companies also cited infrastructure obstacles, including the difficulty to obtain space at industrial zones, the low efficiency of investment and economic information, absence of balanced development in different areas and the poor private sector involvement in some vital sectors.

As for the inter-GCC investment, the survey found even more barriers, especially the absence of real information on investment opportunities and on economic policies in each member.

Two other “very big obstacles” include the low level of inter-GCC trade and excessive procedures in registering investments.

There were also border hurdles that hindered the free movement of goods and services, a lack of clear and transparent systems in some sectors and discrimination against foreign investors in economic dealing and provision of services.

“Due to the growing competition to attract investment, this survey shows that it has become imperative for the GCC to continue their efforts to improve the investment climate,” FGCCI said.



What Should The GCC Do?


  - Carry out measures to revise all laws and legislations governing incentives and facilities for investment in the GCC

  - Take advantage of the new economic concept, which is based on investing in all types of services, especially those related to technology and telecommunication

  - Expand the GCC private sector’s role in contributing to a better investment atmosphere by allowing it to participate in decision-making and in devising local laws and legislations

  - Take quick measures to open up regional stock markets to expatriate residents to attract their investments

  - Intensify efforts to achieve the monetary union as this will create a single Gulf bloc and encourage investors

  - Introduce indices for economic performance in the whole of GCC, covering mainly inflation, unemployment, transparency, competitiveness, investments, and the gross domestic product

  - Work to achieve a higher degree of co-ordination among the GCC countries in the field of attracting foreign capital

  - Increase support for economic establishments in the field of performance, innovation, planning, development, marketing, productivity, employment and other financial services