Foreign Direct Investment in GCC Countries

Running head: DISSERTATION
Dissertation
Name of the student
Name of the university
Author note

1DISSERTATION
Chapter 4
Findings and Analysis
4.0 Findings and analysis
4.1 Necessity of foreign direct investment in oil and gas sector in Oman
Oman is still a developing country and foreign direct investment (FDI) is the key
source of development of the economy of the country. Moreover, according to the Gulf
Cooperation Countries (GCC), the ability of the countries to attract foreign direct investment
can be considered as the source of political, social and economic development in the country
(Ibrahim and Abdel-Gadir 2015). The introduction of the new legal business framework has
liberalised the business environment of the country and restrictions on the foreign firms have
been reduced significantly. The changes that were made are favourable for the foreign
countries and they have the opportunity of investing in the market that is untapped. The
political and the economic stability of the country is a factor, which had attracted the
attention of large number of organizations. Manufacturing industry was mostly benefitted
from this development as the major restrictions were removed in this sector. However, the
restrictions on the natural resource industry have also been reduced significantly. This
globalization policy has been implemented by the GCC with an aim of making significant
developments in the field of economy (Eudelle and Shrestha 2017).
Oman is a country, which is rich in all its resources, but they do not possess the
advanced technology and infrastructure to make proper utilization of these resources so the

2DISSERTATION
government of the country is trying to make use of this opportunity by liberalising the foreign
investment laws in the country. Moreover, the overall climate of investment for the country is
conducive to all the major global nations. The major economies in the world have better
technology, expertise and skills, which will help the still developing nations to get a boost in
their economy (Alraja, Hammami and Al Samman 2016). The location of the country is the
ideal location for trade and most of the countries would prefer using as a source of rich oil
and gas sector. Oman uses free market in trading with other countries so that they can
capitalize of the foreign investment make improvements in the economic development of the
organization. The geographical location of the country is very appropriate and consists of
several ports at the outskirts of the Persian Gulf, which has enabled the country to be linked
easily with the continent of Asia, Africa and Europe. This is the very reason that Oman is the
country, which consists of the maximum foreign investment when compared to the other
countries in the Middle East region (Mubeen and Ravikumar 2016).
However, various studies suggested that change in the environment of business will
not have any effect on the foreign direct investment of the country. On the contrary, as stated
by Varghese, JOHN and QATROOPI (2016), the government policies of the country will
have a positive impact on the foreign direct investments as it will make the nation more
lucrative to the foreign investors. However, motivates of the investors in foreign direct
investment is still not clear and these factors may vary depending upon the sectors in the
market. The oil dominates the economy of the country and gas sector as the majority of the
revenue of the country is generated in this sector. The export of oil to other countries has
been the main source of the foreign capital generation (Abdouli and Hammami 2017). Oman
has always been biased towards the development of the local companies so they have always
discriminated with the foreign investor by making sure that impose restrictions of the foreign
companies. However, the government realised that the growth of the economy is totally

3DISSERTATION
dependent on the globalization so they reduced the amount of taxes on the foreign investors
and created a free market economy. These barriers in the economy were reduced and the
government promoted foreign direct investment, which is the main reason for revitalizing the
economy of the country. The country through a phase of national deficit and the country is
able to overcome these issues by enabling the foreign direct investment in to the country.
This has also helped the country to gain new technologies and knowledge regarding the
improvements in the infrastructure of the country (Agrawal and Sethi 2017).
During the early 90, the country was going through a phase of deficit due to the
reduction in the prices of oil and gas. As the main source of revenue, for the country is the oil
and gas sector so Oman was going through a fiscal deficit. This the time when the country
realized that in order to make improvements in the economy of the country, the government
will have to globalize the economy (Mina 2017). Thus, the government started making
policies, which will create a free market for trade. The policy of the country is based on four
essential pillars, which are business facilitation, new legal framework, promotion of the
country and liberalization of the economy. These key factors were the key reason that the
country consist of the maximum number of foreign direct investments in the Middle East.
The foreign companies are provide with the equal liberty and rights which has developed the
business environment of Oman.
The country has made efforts to promote foreign investment and have made changes
to the policies in order to make improvements in the business climate of the organization.
Moreover, the quality of life among the consumers is high and they have high disposable
income, which is favourable for all the foreign investors in the market. The workforce in the
country is highly educated and bilingual which will help in developing a workforce, which is
productive (Azad and Khatabi 2017). The government is more focused on making
improvements in the field of infrastructure and this huge investment programs started by the

4DISSERTATION
government is grabbing the attention of the foreign investors. The table and the figure gives
us the broad idea about the current economy and the influence of foreign direct investment in
the country.
Oman Trade Last Previous Highes
t
Lowest Unit
Balance of Trade 205.90 79.20 2379.00 -117.60 OMR
Million
[+]
Exports 1036.50 934.10 1992.00 423.00 OMR
Million
[+]
Imports 999.00 593.80 1392.10 242.50 OMR
Million
[+]
Current Account -
4737.00
-4155.00 3403.00 -
4737.00
OMR
Million
[+]
Current Account to
GDP
-15.40 5.10 17.84 -22.47 percent [+]
Capital Flows 1700.00 4741.00 4741.00 -
2411.00
OMR
Million
[+]
Gold Reserves 0.02 0.02 9.05 0.02 Tonnes [+]
Crude Oil Production 968.00 973.00 1057.16 693.04 BBL/D/1K [+]
Terrorism Index 0.00 0.00 0.00 0.00 [+]
Tourist Arrivals 299.00 263.00 436.00 123.00 thousand [+]
Foreign Direct
Investment
717.50 -1035.00 1281.00 -
1035.00
OMR
Million
[+]
Table 1
(Source: Alraja, Hammami and Al Samman 2016)

5DISSERTATION
Figure 1
(Source: Alraja, Hammami and Al Samman 2016)
The above data and the figure suggest that there has been significant increase in the
foreign direct investment of the country. The highest foreign investment was in the year of
2007 and maintains a steady rate afterwards. However, there was a steep decrease in the
investment in the year of 2015 due to the lack in the structural policies by the government.
However, the country has been able to recover from this crisis by making amendments to the
existing policies.
Oman Trade Last Q3/17 Q4/17 Q1/18 Q2/18 2020
Balance of Trade 206 299 102 301 299 248
Exports 1036 1018 1200 1011 1011 1680
Imports 999 782 1100 820 812 1400
Current Account -4737 -2297 -3610 -3629 -3649 -3678
Current Account to GDP -15.4 -17 -17 -15 -15 -9
Capital Flows 1700 2782 2959 3418 3878 4894
Gold Reserves 0.02 0.02 0.02 0.02 0.02 0.02
Crude Oil Production 968 977 976 976 976 976
Terrorism Index 0 0 0 0 0 0