Foreign Direct Investment in the Middle East Term Paper (Term Paper Sample)

Foreign direct investment in the Middle East
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FOREIGN DIRECT INVESTMENT IN THE MIDDLE EAST
Explain how laws, requirements, and regulations, have changed and become more receptive to foreign investments in recent years
Laws, requirements, and regulations have changed in the Middle East countries and have become more receptive to foreign direct investment. This is evident from the following instances. According to the new law on foreign investment in Saudi Arabia, foreign investors can now buy real estate properties that they require for the purposes of running their businesses. Apart from buying real estate properties, they are also free to carry out real estate investment business in all the cities apart from Medina and Mecca (Bishop, Crawford, & Reisman, 2005).
There are no financing, documentation or repatriation requirements. However, the re-export of some imported products that benefit from the subsidies of the government is banned. There is not any control that is imposed on the payment made for current transfers as well as transactions that are invisible. Under the new law on foreign investment, there is no restriction on how to make use of funds that are realized from current transfers together with invisible transactions.
Foreigners are able to invest in shares of companies that are listed in Kingdom Of Saudi Arabia joint stock. Nevertheless, for the non-residents to sell their securities they must be granted permission from the minister of commerce as well as the Capital Market Authority. Investing in securities in Saudi Arabia has become more convenient for foreign investors as there are no controls forced on repatriation of profits realized from the sale of shares by the foreigners.
Foreign investments that have been approved by Kingdom of Saudi Arabia have similar benefits as those of domestic investments. The new law on foreign investment permits foreign investors the right to invest directly in a majority of Saudi Arabia’s financial sectors without the consideration for local participation. The law charges a tax of 20% on foreign companies profit except the profits from oil that are taxed at 85% and 30% of profits realized from investing in natural gas provide the internal rate of return does not exceed 8%.
Identify the exchange arrangement and framework for financial and capital transactions in the countries
The exchange rate in Saudi Arabia has been a conformist peg to the US dollar at a rate of SRI 3.75 for every $1. The Saudi Arabian Monetary Agency (SAMA) places this exchange rate. This rate has maintained stability for the last twenty years; however, the banks may at times charge a rate that is above the official rate by 0.125%. The commercial banks of Saudi Arabia exercise a forward market that is active so at to cover any exchange risk that may arise for the period of equal to one year (Simon Gray, 2013).
There are no requirements on currency what is clear is that any settlements with Israel are forbidden. As far as the resident accounts are concerned the following accounts are acceptable, foreign accounts that are held domestically or abroad, accounts that are in a domestic currency that is exchangeable with a foreign currency. Accounts that are in domestic currency but held abroad can be managed in a branch of the domestic bank.
There is no requirement for a foreign budget. There is also no requirement for financing exports or any documentation for the purposes of foreign exchange. The licensed individuals and companies are the only ones who can participate in the import business. Only the importers can import the products specified in the licenses. There some import products that have been restricted for moral, security, as well as health reasons. Imports from Israel have been forbidden as well as other products that are manufactured by foreign companies that have been blacklisted by the Arab League.
The controls on capital transactions lay down that, at least more than half of the shares that belong to the UAE companies must belong to the citizens of UAE or domestic companies of UAE. However, companies that are located in the UAE free zones are excluded from the above requirement and can be wholly owned by foreign investors.
Evaluate the experiences of financial services companies that invested in the region
Financial services companies have had a favorable environment for carrying out business in the Middle East as well as some positive experiences. The companies interviewed noted that there is market potential in the Middle East region. This market potential was mostly realized when the Saudi Arabia’s is regulatory framework was improved hence pa...