International Economic Development Responsibility

Question: Discuss about the International Economic Development Responsibility. Answer: Introduction: According to Albassam (2015), Saudi Arabian General Investment Authority (SAGIA), is an investment association created in the year 2000, by the government of Saudi Arabia. It helps in formalizing the processes to generate investment in the country and help in gaining economic liberalization. Its prime objective is to provide services of investments to the different sectors of the country like energy, transportation, ICT and knowledge based industries. Achieving economic stability by fostering investment is one of the main objectives of such an association. SAGIA establishes various investment strategies each year that facilitates in the improvement of the economical structure of the country. At present, the rate of gross domestic product for the year 2015 is 653 billion US dollars, with an economic growth rate of 3.4% (SAGIA.gov.sa. 2016). This present value of the economys GDP is a sudden fall in the value, comparatively to the earlier three years. The annual variation investment percentage is -1.5%, which emphasizes a negative impact upon the productive capacity country. There is a record fiscal deficit of 15%, with an accumulated public debt of 5.8% (SAGIA.gov.sa. 2016). The country is in ardent need of an efficient investment strategy that would help the country to upgrade its growth conditions. SAGIAs investment strategies for Saudi Arabia must be able to incorporate effective techniques that would initiate the positive growth of the society. An investment strategy plays vital roles in attaining economic stability of the country. One of the most beneficial effects of the investment strategy is to promote regional development, achieve economic diversification, create employment, enhance competitiveness and generate trade and investment in the country. SAGIA helps in forming a well developed investmet promotion strategy that helps the construction sector of the country. Saudi Arabia has a large construction sector with an annual gdp of about 21billion US$. In 2013, the country had to import almost 36% of medium value added inputs and 62% of high value added inputs for construction sector of the country. The country can invest the forign direct investments in the construction sector, so that it easily utilizes the resources for building an equipped infrastructural unit of the economy. The foreign direct investment in Saudi Arabia has decreased to a certain extent in the country. Government has heavily invested on the countrys infrastructural facilities in order to attract the FDI, as it is considered to be one of the effective ways to diversify the economy. SAGIA aims at attracting the FDI in order to create the largest construction market in the middle east. Government lays emphasis on improving infrastructure , transport, and real estate. The Saudi Arabian government has planned to raise funds by formulating promotional investment strategies in order to construct 3000 new schools and 117 hospitals over the period of 2015-2020. Ministry of housing would launch housing projects in various cities of the country. A new court would be created who would tackle only the real estate matters and the firms are supposed to join the ijar system. The non-oil sector is being put to focus by the banking sector, so that it initiates FDI in the country (Flora and Agrawal 2014). SAGIA provides with information and assistance to the foreign investors. It permits the foreigners to invest in various sectors of the economy. By improving the investments inflow in the country, it would help the country to open trade and investment establishment. Investments are encouraged to be invested inindustrial district, seaport, residential area, central business district, resort and educational zone. Main focus is laid on cities like Rabigh, Hail, Madinah And Jazan which are aimed at building economic cities of the country. Along with the information provided by the SAGIA to the investors, it even provides them with the license and support services, coordinates with the government ministries to enhance the process of investment (Jensen and Lindstdt 2013). Along with the positive effects of trade and investments in Saudi Arabia, there are some negative effects prevailing in the country that discourages investors to invest in the country. Government of Saudi Arabia lays stress on hiring the Saudis for higher proportions and at higher costs, restrictive visa policy for the foreign workers in the country, slow payment under the government contracts, following a conservative social customs, and gender biased workforce (Moosa 2016). An efficient investment strategy should be created by SAGIA that would be worthy enough to attract the foreign investors, thereby helping the country to overlook the negative effects of dealing with the country and emphasizes on building a healthy trade relation. Sustainability Issues and Implications of Investment Promotion Strategy Investment promotion strategies help in building the image of the country and generating investment by attracting them through different sets of incentives by targeting specific investors who are committed to various social benefits . The world bank has ranked Saudi Arabia as the 12th country out of 183 countries who has been able to do business with foreign investors (Data.worldbank.org, 2016). This rank showcases the methods and effort made by the country in improving their investment promotional strategies as generated by SAGIA. Yet there are many investors who have shown some concerns regarding the laws that are applied un practice by the company. There is a limit on the amount of foreign investments that can be made in Saudi Arabia. There is uncertainity of the global economies impact on private sector participation. Developers find it difficult to get the availability of contracting capacity, while contractors fin it difficult to source labour and materials during many phases of the economic cities project development. The construction sector faces a great drop in value of contracts awarded during the year 2014. There was a fall of 77% in the contracts as a result of decline in the price of hydrocarbons thereby putting an impact on the oil revenues and raising government expenditure. This delay hampers the progress of building economic cities in the country and threby posing a thrat to the construction sector of teh economy. According to Moser, Swain and Alkhabbaz (2015), SAGIA , in order to attract the foreign investors, provide them with 100% ownership of projects, removes restrictions on foreign employees, charges no personal income tax from the foreign companies, provides with various export and import incentives along with least amount of leasing charges with a contract term of minimum 2 years. In spite of all the major facilities provided to these companies, there are some flaws if the in the rules framed by the country that discourages the foreign investors to sign a deal with Saudi Arabia . All the companies that are willing to invest in the country must possess a license issued from SAGIA to that company. After the issuance of the license, SAGIA is supposed to respond to the application within thirty days. If SAGIA does not respond within the prescribed time period, then the application is supposed to be accepted. As stated by Seguin (2014), in reality, the true picture states a different scenar io. All these contradicting matters have discouraged various foreign investors to obtain a license in Saudi Arabia (Aldosari and Atkins 2015). SAGIA has been establishing various investment promotion strategies and have been diverting itself from the previous strategy. The companies have been forced by SAGIA to some extent to abide the hiring quotas and transfer of technologies within 18 months. This model does not fit all the business types (Rogmans and Ebbers 2013). Many investors were discouraged by the regulations made by SAGIA . They found it quite vague in nature. There is lack of coordination and rivalry persists mong the government bodies and ministries of the state. All these various issues implies sustainability problems of the various investment promotional strategies generated by Saudi Arabian general investment authority (SAGIA). Recommendations for Investment Promotion Strategy As stated by Hsu and Tiao (2015), Saudi Arabian General Investment Authority (SAGIA) has formulated various investment promotion strategies that helps the country to attract the foreign direct investment and initiate the productivity in the economy. Investments would help the country to upgrade their infrastructural facilities and upgrade the construction sector of the country. Generation of employment schemes for the Saudi people would take place that would maintain the standard of living. Yet, the strategies created by the association is not able to successfully attract the foreign investors. Various issues have created a controversial environment dor the association in attracting foreign investment. The association must specify the investment companies that had been targeted for the promotion process and must be contacted by the association to provide them with various incentives and invite them to invest in Saudi Arabia. It must lay emphasis on the coordination with the concerned authorities regarding the investment promotion. SAGIA must actively participate in the promotional activities in less developed areas. The website of SAGIA must be linked with the websites of other authorities concerned with investment. It must help in attracting the companies that are interested in investing for the economic cities of the country. The process of building the cities must be made quite attractive so that it is successful in attracting the investors. SAGIA must be clear in its strategies and provide the companies with a detail list of facilities that would be provided to them.(Cader and Anthony 2014). SAGIA must organize periodic meetings with the investors to present them with the investment opportunities and get the opinions , suggestions and problems from them . They must provide the investors with all the detailed information regarding the investment schemes and organization their visits to Saudi Arabia . These above mentioned recommendations would help to attract most of the investments and would be successful in implementing an efficient investment promotion strategy. Reference Albassam, B.A., 2015. Does Saudi Arabias economy benefit from foreign investments?.Benchmarking: An International Journal,22(7), pp.1214-1228. Aldosari, A. and Atkins, J., 2015. A study of corporate social responsibility disclosure practices in Saudi Arabia. Cader, A.A. and Anthony, P.J., 2014. Motivational issues of faculty in Saudi Arabia.Higher Learning Research Communications,4(4), p.76. Flora, P. and Agrawal, G., 2014. Foreign direct investment (FDI) and economic growth relationship among highest FDI recipient Asian economies: A panel data analysis.International Business Management,8(2), pp.126-132. Hsu, J. and Tiao, Y.E., 2015. Patent rights protection and foreign direct investment in Asian countries.Economic Modelling,44, pp.1-6. 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