As part of the EU-GCC invest project, which was cofounded by the European Commission, the German-Saudi Arabian Liaison Office for Economic Affairs (AHK Saudi Arabia) in cooperation with Eurochambers and the Federation of GCCC Chambers organized an investment symposium on the 27th of April in Riyadh in order to promote mutual investments in the EU and the GCCC.
Many high-ranking speakers attended the event, including HRH Saud bin Khaled al Saud (Deputy Governor – Saudi Arabian General Investment Authority) and Eng. Saleh Al-Rasheed (Director General – Saudi Arabian Industrial Property Authority) who spoke about the role of FDI in context of the Saudi Arabian Economic Vision andcreating an environment for foreign investment. The speeches were followed by a panel discussion, moderated by the Delegate of German Industry & Commerce for Saudi Arabia, Mr. Andreas Hergenroether. Mr. Azzam Shalabi (President of National Industrial Cluster Development Program) and Mr. Mutlaq Hamad Al-Morished (Chief Financial Officer SABIC) discussed the role of direct Investments in the GCC and EU and its opportunities for greater cooperation with representatives of the private sector and European commercial counsellors. EU-GCC Invest is a joint project initiated and co-funded by the European Union, the German Emirati Joint Council for Industry and Commerce (AHK UAE), the Delegation of German Industry and Commerce in Saudi Arabia and Yemen (AHK Saudi Arabia), Eurochambres and the Federation of GCC Chambers (FGCCC).
As part of the EU-GCC Invest project AHK Saudi Arabia and AHK UAE have conducted a survey among European and GCC Investors. Through various interviews and statistical research, EU-GCC Invest has sought to increase the understanding of the investment climate between the two regions and suggest recommendations for further cooperation. The executive findings on the interregional FDI Climate were presented by Christian Engels (AHK Saudi Arabia).
EU – Investments in GCC
Most of the factors influencing investment in the GCC received a rather positive feedback in the survey and no factor received an average rating below 4 points of 10. The geographic location, available infrastructure and the tax laws in the GCC all received a high positive average feedback. The economic situation in the GCC had the highest average positive ranking of all factors. The final section of the survey, in which participants were asked to outline the single most positive and negative factor influencing their investment decision, further supported these findings. Besides the economic situation in the GCC, the high governmental spending was one of the factors that had a positive influence on the decision to invest in the region.
Although participants valued the stable political situation in the GCC itself, the unstable situation in bordering countries seemed to bother companies most and could be seen as a reason for not investing in the GCC. The restrictions on ownership especially the requirement of a local partner were also viewed as having a negative effect on investment climate. The need of domestic participation keeps European companies from investing more in the GCC.
The cost and length of judicial proceedings as well as the cost of attorneys were also factors that have a negative influence on the investment decision-making process. The visa regulations and the availability of work force also had a negative impact on the decision to invest.
While the political situation in neighboring countries is a factor that can barely be influenced from outside, the ownership and visa regulations could be altered in a way that could positively influence the companies’ decision to invest in the GCC. While the majority of respondents replied that their investments would not necessarily be bigger or smaller if a certain concern of theirs was addressed, one third of the companies said that the investment process could be made more accessible and faster by addressing some of the issues mentioned and thus their investments would be significantly higher. Therefore, the findings of the survey can help identify some major concerns of European companies when investing in the GCC, firstly the ownership regulations, secondly legal aspects and thirdly access to qualified staff.
GCCC-Investments in EU
In conclusion, the survey of GCC investors in the EU has painted a generally favorable picture regarding the investment atmosphere for the GCC businesses interested in investing in the EU. The majority of GCC businesses who already have invested, or are about to invest, in the EU and participated in the research, represented medium to large companies, who frequently covered more than one industry sector. The majority of respondents had a turnover in excess of 40 Million Euros per annum in the EU. Experiences and perceptions between the different surveyed companies were similar, despite a spread of participants across all 6 GCC countries.
The majority of factors influencing investment in the EU received a positive feedback in the survey. Categories such as trading across border as well as Protecting Investors all received a positive average feedback. Most significantly, political stability had the highest average positive ranking from any factor with a ranking of 8.45, followed by the second highest average rating for available Infrastructure. Also the economic situation and right to own property both received some of the highest ratings in terms of average scores. The final section of the survey, in which participants were asked to outline the single most positive and negative factor influencing their investment decision, further supported these findings. Political stability, available infrastructure and access to a large market economy were here too reoccurring answers, which therefore support the three most positive factors.
In terms of having a negative impact on the decision to invest in the EU, the survey highlighted three categories, which can be seen as being adverse to a positive investment atmosphere. Despite a generally very positive view regarding the legal right to own property and investor protection, scores were generally negative for the category of legal issues and enforcing contracts. Here the length of judicial proceedings was particularly noted as having a negative influence (average rating of 3.75) on the investment decision-making process alongside corporation tax (average rating of 3.5) and the price of real estate (average rating of 4.25). The most negative rating though was given to Visa Regulation, which only scored an average rating of 3.33. All of these factors besides corporation tax were also mentioned by separate companies as having the most negative impact on their decision to invest in the EU.
There was no indication that a single factor was directly responsible for either attracting or discouraging FDI. The majority of respondents replied that their investments would not necessarily be bigger or smaller if a certain concern of them was addressed, yet the investment process could be made more accessible and faster by addressing some of the issues mentioned. On average, the majority of categories received a positive feedback though and no single individual factor was rated lower than 3 in the survey.