Gulf nations fall in EIU rankings

The Gulf states have slipped alarmingly in terms of their attractiveness to business, and as a location for investment, according to a new report by leading business management analysts.

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By  Andrew White Published  April 2, 2006

The Gulf states have slipped alarmingly in terms of their attractiveness to business, and as a location for investment, according to a new report by leading business management analysts. The Economist Intelligence Unit’s (EIU) global business environment rankings place the UAE highest in the region, at 30 for the forecast period 2006-2010. However, the nation’s 2001-2005 rank stood six places higher, at 24 worldwide. Qatar lies at 32, three down from the last rankings, whilst Bahrain has dropped a massive ten places to 36. Kuwait and Saudi Arabia have each slipped three places, to 46 and 53 respectively, and Jordan has plummeted 11 places to 63. Each nation has scored higher for the forecast period 2006-2010 than they did for the previous period. However, their slowdown in relation to other nations will be of concern to states already reeling from the region’s stock market slump. “Whilst the GCC states have respectable rankings, this is in large part due to their strong current performance on macroeconomic indicators - due to oil prices - and in specific areas such as tax policy, where they score very well, thanks to their lack of taxation,” Keren Uziyel, the EIU’s senior editor and economist in country forecasting services for the Middle East and North Africa, told Arabian Business. “Some countries, such as the UAE, have started to make progress in allowing foreign direct investment (FDI) and foreign ownership, but numerous restrictions still remain,” Uziyel said. He also highlighted workforce skills shortages and employment difficulties as inhibitors of investment attractiveness, and questioned the health of private enterprise in the Gulf region. “Some countries, for example Saudi Arabia, have serious local workforce skills shortcomings or other employment problems,” he said. “These countries also perform relatively poorly on private enterprise policy, and even those countries that are making advances in terms of diversifying their economy or improving their infrastructure, are doing this through state institutions, not to mention the state-controlled oil sector.” The EIU’s global business environment rankings model is applied to the world’s 82 largest economies, which account for more than 98% of global output, trade and FDI. It measures the quality or attractiveness, adjusted for country size, of the business environment and its components - the political and institutional environment; macroeconomic stability; market opportunities; policy towards private enterprise; policy towards foreign investment; the foreign trade and exchange regime; tax system; financing; the labour market; and infrastructure. The model considers more than 90 factors, across the 10 categories, which affect the opportunities for, and hindrances to, the conduct of business. The resulting scores allow the EIU to rank the countries. The model is used to generate scores and rankings for the past five years, and also for the next five years, using the EIU’s economic forecasts and assessments of likely business and political developments.

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