The effect of business environment on trade in Gulf Cooperation Council countries

• Pages: 200-212
• DOI: https://doi.org/10.1108/14770021111165490
• Date: 13 September 2011
• Published date: 13 September 2011
• Author: Azmat Gani
• Subject Matter: Economics

The effect of business

environment on trade in Gulf

Cooperation Council countries

Azmat Gani

Department of Economics and Finance, University of Bahrain, Zallaq, Bahrain

Abstract

Purpose – This paper aims to investigate the effect of business environment indicators (time

required to start a business, time required to register a property, time required to enforce a contract,

and time to resolve insolvency) on trade in a sample of four Gulf Co-operation Council (GCC) countries:

Kuwait, Oman, Saudi Arabia, and United Arab Emirates.

Design/methodology/approach – The methodology included in this paper is based on a regression

analysis of annual data on trade and business environment indicators for the 2003-2009 period. The

data are pooled across the four countries. The empirical analysis uses the fixed effects estimation

procedure as this is considered to be the most appropriate given the nature of the available data and

sample countries.

Findings – The results obtained through fixed effects estimation provide strong evidence that the

time required to start a business and time required to resolve insolvencies is negatively and

statistically significantly correlated with imports. The findings also reveal that the time required

registering a property, the time required to enforce a contract, and the time required to resolve

insolvencies are negatively and statistically significantly correlated with exports. Other standard

determinants of imports and exports are also confirmed.

Research limitations/implications – The major limitation is the absence of measures of business

environment indicators for two of the six GCC countries (Bahrain and Qatar) where consistent

measures were not available and these countries are eliminated from the empirical analysis.

Originality/value – These results lead to the conclusion that domestic business environment

matters for trade in the GCC countries. There is a need for GCC countries to continuously reform their

business environment so as to be integrated and stay competitive in this globalizing world.

Keywords Trade, Exports,Imports, Gulf Co-operation Council,Business environment,

Contract enforcement, Property registration, Kuwait,Oman, Saudi Arabia, United Arab Emirates

Paper type Research paper

1. Introduction

This paper examines the impact of the quality of business environment on trade in

selected GCC countries. Its main contribution to the literature is that it attempts to link

four aspects of business environment (the time required to start a business, the time

required to register a property, the time required to enforce a contract, and time to resolve

insolvency) with trade, an area of research that is highly important, yet rare in trade

research. GCC countries have been characterised with expanding trade structure in

recent times with the aim of greater regional integration and participation in the global

trading environment with the aim of achieving higher levels of growth and national

development. The argument is that for countries to fully integrate in the global trading

environment and to benefit from outward-oriented trade strategies, the quality of

domestic business environment can matter. Like elsewhere, the focus of the GCC’s on

trade as an engine of growth requires that policymakers pay particular atten tion

The current issue and full text archive of this journal is available at

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JITLP

10,3

200

Journal of International Trade Law

and Policy

Vol. 10 No. 3, 2011

pp. 200-212

qEmerald Group Publishing Limited

1477-0024

DOI 10.1108/14770021111165490