GCC Inward and Outward Foreign Direct Investment and Capital Flows

Abstract

Real economic growth is measured by GDP growth and is often reflected in a high ranking of a country’s economic and financial risk (Calderon et al. 2003). However, GDP growth and per-capita GDP are not always true indicators of real socioeconomic condition and growth, as exemplified by some of the most affected countries of the “Arab Spring.” Tunisia and Egypt, at the start of the “Arab Spring” enjoyed high GDP growth rates over the previous 10 years, even during the period of the global financial crises that started in 2008. These countries attracted Foreign Direct Investment while political risk was high. This chapter examines the FDI allocated in the GCC region and whether this flow of capital was coming from outside the region or from within the region itself. Research has indicated that long-term foreign investors will come to the GCC countries with direct investment, while short-term portfolio speculators will prefer to allocate into indirect investment in stock exchanges (Alami 2011).

In God we trust, all others must pay cash.

American saying