Foreign Direct Investment In today's global market, foreign di

In today's global market, foreign direct investment is common practice for many companies. Through this type of investment, consumers in Canada can purchase Japanese cars manufactured in the United States, and similar types of situations occur throughout the world. This type of investment allows companies to seek new markets and new opportunities, and to find labor pools appropriate to the company's needs. At the same time, foreign investment can provide a boon to national economies eager for additional economic activity to boost their own productivity. As companies consider foreign direct investment, they need to remember that not all countries are equally attractive investment opportunities, and countries now compete for investments from various companies. This research explores foreign direct investment in the Middle East, with a particular emphasis on Saudi Arabia and Kuwait, and considers the benefits and costs to the Gulf States of foreign direct investment.

Foreign Direct Investment Considerations for Companies

Political change is one of the risks that companies face when they take on international marketing, and particularly in highly volatile areas such as the Gulf States. For example, American and British oil companies operating in Iran faced high losses when that country nationalized the oil industry. Such government intervention is intended to achieve domestic political ends, although it can also be used to motivate a foreign country to chan

tiating parties to move forward in the Middle East peace process, and Saudi interests also include the support of moderate regimes and disapproval of destabilizing elements in the region. While supporting the Middle East peace process, the Saudi Government has chosen to let the parties negotiating bilateral peace agreements with Israel take the lead in normalizing relations with Israel ("Country Commercial Guide: Saudi Arabia," 1995, p.�8). Subsidies have been a burden as finances tightened over the past few years. Health care is free, gasoline costs 60 cents a gallon, diesel 37 cents. The 1995 budget, with its increase in utility prices and a further cutback in spending, suggests the Kingdom is tackling its budget difficulties and moving in the direction of key reforms that will improve the trade and investment climate. Even with the rate increases, electricity and desalinated water are still provided below cost. This belt-tightening could indicate possible instability within the kingdom as citizens come to terms with different standards of living than in previous years, but the overall effect is not expected to be of a magnitude which would undermine political stability. Foreign investment is generally welcomed in Saudi