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Tribune NEws Network
Doha
The GCC-India corridor presents immense opportunities for investors and the multi-billion dollar relationship, is winessing a rapid increase, a report by Alpen Capital, an investment banking advisory firm said on Tuesday.
The report titled"GCC-India corridor Investment opportunities and challenges" says relations between the two regions are maturing beyond trade, as they realise the potential of cooperation and growth.
According to the report, India's share of the total investments in the GCC increased from 4.7 percent in 2011 to 16.2 percent in 2016 while GCC investments into India also continued to rise from 0.7 percent in 2011 to 2.9 percent in 2016.
"The GCC governments are continuously reforming policies to create an environment conducive for investment by foreign entities. On the other hand, India, as a fast growing and emerging economy, is in the process of upgrading infrastructure, creating a digitally empowered society, increasing local manufacturing and enhancing energy production," said Rohit Walia, Executive Chairman, Alpen Capital
He said such initiatives from both regions would create increased investment opportunities and further strengthen the relations between GCC and India.
The report noted that sectors such as oil & gas, food processing, healthcare, education and infrastructure seem to be the top picks for investors looking towards GCC as an investment destination.
It said in India, sectors such as infrastructure, ICT, food processing, and healthcare prove to be more attractive as investment opportunities for GCC companies. The Alpen Capital report further said the GCC nations have been able to self-fund their economic development through the wealth accumulated from the export of oil and gas.
"Nonetheless, foreign investments have remained imperative in diversifying revenue base, strengthening technological capabilities, improving export competitiveness and creating employment opportunities," the report said.
In contrast to the overall decline in total foreign direct investment (FDI) in the GCC, investments from India grew at a compound annual growth rate (CAGR) of 15.9 percent from $1.4 billion in 2011 to $ 2.9 billion in 2016, the report added.
The report pointed out that the GCC region offers a conducive environment for business with least demanding tax structure, low-cost electricity and natural gas, strong transport connectivity and investor-friendly free trade zones (FTZs) and Special Economic Zones (SEZs)."Due to their strategic location between the east and west, the GCC nations are seen as a gateway to the markets of wider Middle East and CIS countries," the report said. Furthermore, the report said that with an average GDP per capita (in PPP terms) of $61,559, most of the GCC nations rank amongst the top ten richest countries in the world.
Although the prevailing economic slowdown is affecting spending power of the consumers, the situation is likely to improve in the long-term with intensifying revenue diversification measures.
Regarding the investment challenges, the report stated that the round of oil price meltdown has affected the oil-based revenue of the GCC countries.
It said subsequent austerity measures to shore up revenues have reduced government spending on infrastructure projects, consumer spending power and business activity in the region, thereby leading to a decline in investment inflows.
"A persistent weakness in oil prices coupled with measures such as the forthcoming introduction of value added tax (VAT) could impede investments.," the report added.
A limited pool of local talent, increasing emphasis on nationalisation of jobs and high attrition rates are hindering the growth of labor-intensive sectors in the GCC. Other challenges to investments in the region include the diplomatic crisis with Qatar and rising interest rate.
The currencies of GCC countries, except Kuwait, are pegged to the US Dollar. The currency peg is presently acting as a double-edged sword, with one end cutting the non-oil export competitiveness due to the appreciation of the US dollar and the other hand affecting credit growth due to rate hikes by the US central bank.
Such a credit environment is unfavourable for companies looking to raise capital to fund their general business activity or expansion plans, the report said.
