The pros and cons of foreign investment

Observer

09-07-2025

Some economic reports reveal several violations occurring through foreign investments in countries seeking to expand their economic activities and boost economic growth. We have recently read about some foreign countries hacking into their local systems by collecting important information about various situations, institutions, and individuals, including their contact numbers, private messages, and other matters, and providing it to hostile countries. This information can be exploited in the event of wars and military and economic skirmishes.
This does not mean that countries should stop attracting foreign investments, but they must monitor these institutions and their employees, especially those that attempt to exclude national cadres from employment. We have recently witnessed this with the insistence of some countries on excluding national competencies from working in the institutions they establish through foreign investments, which gives them the opportunity to manipulate the data of these companies and avoid oversight from the relevant authorities. This is something we must be careful about and avoid underestimating during the coming period.
The value of foreign investment in Oman currently stands at approximately RO 30 billion. This has been achieved as a result of the efforts made by relevant authorities in the country over the past decades to transform the national economy into a competitive one based on industry, investment, and innovation, rather than relying on traditional activities. This was highlighted by Qais bin Mohammed al Yousef, Minister of Commerce, Industry, and Investment Promotion, in his recent statement to members of the Shura Council.
As is well known, foreign investment in any country plays a pivotal role in supporting economic development, but it also carries with it some challenges and risks. The positives of foreign investment include the transfer of technology and expertise, that benefit the local market, contribute to the development of the technical skills of the national workforce, and create job opportunities through the launch of new projects. This increases national income, improves project infrastructure, encourages competition, and improves the quality of local products and services.
However, foreign investment also has numerous negatives, including the potential for economic exploitation, as some exploit the natural resources of these countries or exploit cheap labour without providing fair returns to the state. Today, they exist in some African countries, where rare minerals are extracted to generate huge profits in exchange for nominal royalties to governments. Some companies also influence national sovereignty by imposing conditions and offering special privileges, along with occasional political interference. Some companies transfer significant amounts of their annual profits abroad, reducing the net positive impact on the local economy.
Meanwhile, foreign companies possess capital and technology that make it difficult for local companies to compete with them, while others work to weaken environmental or labour laws. In general, some foreign companies have the ability to violate laws in several ways, including through the complicity of local officials, weak oversight, bribery to obtain contracts or legal exemptions, corruption, tax evasion through accounting manipulation or transferring profits to low-tax countries, and violations of environmental laws and the exploitation of workers, who are forced to work for low wages or in inhumane conditions.
Finally, foreign investment is a double-edged sword, requiring careful regulation and oversight. Furthermore, it poses a threat if tolerated without strict laws or transparency. This prompts host countries to establish clear and robust legal frameworks that protect their sovereignty and citizens, and ensure a balance between attracting investment and their economic and social interests.
HAIDER AL LAWATI
The writer is a Muscat-based economic analyst who previously worked for CBO and OCCI.