The customer is always right. This is true whether you are in the business of selling shawarma or investment opportunities. For governments, therefore, foreign investors are like that hungry driver who roars up honking his horn for a platter of sandwiches in time for iftar. Anything short of now is simply too late. This is especially true when belts are tightening, as they are now in the global economic downturn. No matter how much your country's opportunities may argue for larger allocations, a shrinking investment pie means you need to fight harder for every slice.
Last month, this column explored the concept of risk in business and investing, and discussed how appraising risk involves factoring in the cost of red tape and bureaucracy. This week, the World Bank released its latest annual "ease of doing business" rankings, the Michelin guide of foreign investing, and so it is time to turn once again to this theme. Unsurprisingly, Singapore tops the list. The city-state has long operated under the mantra that whatever the foreign investor wants, the foreign investor gets. And the world's other major financial and trade centres reaffirm their status by showing up in the top 20 - there is the US in third place, Hong Kong in fourth, the UK in sixth and Japan at 12th.
Conspicuous by its absence in that top echelon, however, is the latest aspirant to the ranks of the world's trade and financial capitals, the UAE. After languishing at 68th in last year's list, the Emirates vaulted to 46th - out of 181 countries. The World Bank credited the UAE for creating Emcredit, the Dubai-based credit bureau whose aim of helping banks keep from lending out too much to a single individual has been set back by the fact that banks by and large do not yet use it.
Dubai's unflinching investigation into allegations of fraud and Abu Dhabi's steps to create a one-stop shop for foreign investors need to be cheered, therefore, because 46th is not exactly something to brag about. Even more disappointing is that the UAE was edged out by Qatar, which debuted on the ranking at 37th, and Bahrain, which appeared at 18th. So what? Who needs foreign investment if you are sitting on a trillion dollars or so of oil revenues, right? Wrong. In a globalised marketplace, there is nothing to keep domestic investors from going where opportunity is matched by hospitality. And while private equity investors will tell you that the richest returns come from some of the riskiest markets, so do the most staggering losses. If it is risk you fancy, consider a flutter in Laos, number 165 on the World Bank's list.
As difficult as doing business might be in tiny, corrupt, Communist Laos, it is easier to enforce a contract there, by the World Bank's estimation, than right here in the UAE. It is easier to close a business in Indonesia or India. And both Jordan and Syria offer better protection for investors. In fact, the UAE may have the most to learn about how to cut through red tape not from Singapore - which has relied on foreign investment and trade since it was hacked out of the mangroves more than a century ago - than from its giant, oil-soaked Arab neighbour to the south, Saudi Arabia.
Despite being the world's largest oil producer and exporter, Saudi Arabia seems to get it on foreign investment. "We're not looking for cash," said Awwad al Awwad, the deputy governor for investment affairs at the Saudi Arabian General Investment Authority (Sagia) in Riyadh. "We want to attract substantive investors who can transfer knowledge and technology and help us shape our economy for the next 10 to 20 years."
And create jobs for Saudi Arabia's growing population of young - and increasingly unemployed - workers. To lure more investors, Saudi Arabia established Sagia in 2000 and since then has set up a National Competitiveness Centre with an aim to rise into the top 10 on the World Bank's list by 2010. Saudi Arabia has already come up from the high 60s four years ago. Mr Awwad said Saudi hired the Monitor Group in the US to help it to devise ways to improve its investment environment. One result was a one-stop shop for foreign investors that brings together representatives from 25 different agencies to move investments more swiftly from proposal to approval. Anyone investing in the kingdom's four new "economic cities", moreover, can also set up 100 per cent-owned companies - no local partner or sponsor necessary. A new series of laws protects investors, new deadlines on bankruptcy proceedings expedite settlement for creditors and a 50 per cent cut in port fees has eased foreign trade.
Saudi Arabia still ranks only slightly above the UAE in enforcing contracts, an area Mr Awwad said the country was trying to improve by creating a specialised commercial court and cutting down on procedures. It also sent some of its judges to Singapore earlier this year for training, he said. With nations and cities now competing openly for foreign investors and foreign talent, even the most accomplished capitals have to look over their shoulders. "If you don't do anything, you're not staying in the same position," said Mr Awwad. "You're going backwards!"
@email:warnold@thenational.ae
