Foreign investment is diverted by myths

Nomura addresses misconceptions about GCC markets.

Foreign investors just don't "get" the Gulf. At least that is the way Nomura Securities sees it. The Japanese investment bank lists five misconceptions about GCC countries that are common in the global business community. Chief among these is the assumption that it is difficult to set up a business here. "It's interesting to see how much the UAE and Saudi Arabia improved in the last five to 10 years, while Kuwait has fallen behind its peers," said Victor Shvets, a strategist at Nomura in London.

Nomura says it is easier to establish and close a business in the Gulf than in most emerging markets including the so-called BRIC countries of Brazil, Russia, India and China. And on the business indicators ranging from construction permits to property registration and cross-border trade, the GCC also beats the global average. But Nomura's report card acknowledges that the region could do better at economic diversification.

While oil and gas remain dominant, greater efforts are being made to move into manufacturing, primarily in Saudi Arabia, Mr Shvets said. "Looking at Saudi Arabia, if you strip out oil, if you strip out petrochemical businesses, if you strip out the volatility of oil prices, which causes nominal GDP growth rates to go up and down, the only constant is manufacturing." The Saudi manufacturing base is stronger than in other petroleum countries such as Russia, the analyst said. According to other myths, the region is hamstrung by inadequate investment in education and by low female participation rates in the labour markets. But the number of working women is on the rise, "telling us that the society is becoming more liberal", he said.

The last myth is that Dubai's well-publicised debt problems could presage additional bad news in the wider region. The challenges facing Dubai are unique to that emirate in scale and impact, he said. [e-mail]