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Doing business in GCC

Countries need adjust to an ever increasing competitive world

Gulf News

Regrettably, of the six-nation grouping of Gulf Cooperation Council (GCC) countries, only the UAE and Oman have succeeded in improving their rankings in a key global publication dealing with ease of doing business. The reference is the recently published Doing Business 2013, produced jointly by the World Bank and the International Finance Corporation.

The report offers quantitative comparisons on business regulation and the protection of property rights in 185 economies with regards to small and medium enterprises. The SMEs are widely regarded internationally as major sources of new employment opportunities in many parts of the world, with GCC region being no exception.

Reviewed economies, which fairly represent the global economy, are ranked on results achieved in relation to 10 different areas, in deemed essential. These variables comprise of starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency.

With regards to performance of GCC countries the UAE has managed to improve its ranking by 7 notches thereby securing number 26 worldwide amongst 185 economies compared on the basis of regulations of domestic firms. This places the UAE second only to Saudi Arabia in the report.

Saudi Arabia

Still, it could merely be a matter of time before the UAE overtakes Saudi Arabia’s leading role on the index. To be sure, the kingdom’s ranking has sustained setbacks over the past few years, dropping from numbers 10 in 2011 report to 12 and in 2012 and still to 22 in the latest report.

Saudi Arabia’s advantages are partly a reward for preparing the country for accession to the World Trade Organisation in late 2005. Amongst others, Saudi authorities enhanced Foreign Investment Law (FIL) by granting foreign firms the right to own majority stakes in companies within the kingdom. Also, the law is noted for allowing foreign banks to operate in the form of locally incorporated joint stock companies or as branches of international financial institutions, in turn benefiting the cause of competition and hence extended services. With a gross national product (GDP) of $633 billion (Dh2.3 trillion), the kingdom’s economy ranks the largest in the region and amongst top 20 worldwide. This translates into the local economy enjoying ability to accommodate competition.

This fact becomes a clear reality during the annual Haj, where sky is the limit concerning demands of millions of pilgrims. I got a first-hand account of this phenomenon whilst attending the annual Haj last week.

Certainly, the link between ease of doing business and the ability of attracting foreign direct investments cannot be overlooked. According to The World Investment Report 2012, issued by the World Conference on Trade and Development (Unctad), Saudi Arabia enticed some $16.4 billion in 2011, down from $28.1 billion worth of FDI in 2010.

Leadership by UAE

Conversely, the UAE saw FDI increasing from $5.5 billion in 2010 to $7.7 billion in 2011 partly reflecting friendlier or easier ways of doing business in the country.

In fact, the UAE demonstrated leadership amongst fellow GCC economies in the Doing Business 2013 with regards to progress made in ranking and reforms. The report gives credit for reforms concerning appreciation of information and communication technologies, particularly online services like applying and paying for utility services.

Wrongly, four GCC countries saw their rankings plummeting in the 2013 report, thereby against the international trend. In particular, Kuwait sustained the biggest drop from an already not impressive ranking of 67 in 2012 to that of 82 in 2013.

The challenge for GCC economies at large relates to streamlining their international rankings in an ever competitive world.