Barriers and Opportunities for Enhancing Capital Flows
In the COMCEC Member Countries
74
for another thing, there is no shortage of hard currency in the region. 80 Foreign
investors may find it straightforward to hedge exposure to these currencies.
 Liberal foreign equity participation measures. Many countries within the high-
income group encourage foreign equity participation through liberalised regulation,
while maintaining some limitations on foreign ownership in particular sectors, such as
the media. In Jordan, for instance, many domestic businesses actively seek engagement
with foreign partners as a way to increase their competitiveness and access new
international markets. 81
4.6.4. HIGH-INCOME COUNTRIES
Barriers
With the exception of Brunei, the countries in the high-income group are oil exporting
members of the GCC. Some have attracted high levels of capital inflows as they have begun
opening up their regimes. However, a number of barriers to enhancing capital flows remain.
General barriers
 Limited market size. For some countries in the group, their small size limits their
absorption capacity. As investment locations, their attractiveness may relate more to
investors with an efficiency-seeking motivation rather than to investors with either
market-driven or resource-driven considerations. Notable here are Bahrain, Oman and
Kuwait, whose populations range from 1m to 3.5m.
 Human resource constraints. Although foreign investors tend to have a positive view
of labour laws across the GCC states, human resource constraints do have a significant
negative impact on investors’ perceptions of the countries as places to do business. For
example, European companies state that they have difficulties finding qualified local
staff.82 At the same time, however, local governments are putting growing pressure on
private companies to hire increasing proportions of local nationals.
 Political climate continues to be unsettling . In some cases, high-income countries are
experiencing periods of political instability, or are suffering from the spillover effects
of tensions in neighbouring countries which may have a negative effect on private
capital flows. In Bahrain, for example, inward portfolio investment fell to US$419m in
2012 from US$2.7bn a year earlier.
Barriers relating to financial stability and institutional capacity
80 OECD, ‘Investment security in the Mediterranean (ISMED) Support Programme, June 2013
81
82 M. Bossdorf, C. Engels and S. Weiler, EU GCC Invest Report 2013