Law builds trust, and trust attracts investment

In one of my conversations with Saqr, we discussed foreign investment, how capital chooses its destination among countries, and why some nations succeed in attracting and retaining investments. Saqr asked: Isn’t the primary goal of an investor to achieve profits? Why do we assign such importance to the law? I replied: Certainly, profit is the fundamental driver of any investment activity, but investors do not seek profit alone. They also seek assurance regarding the future of their funds and projects. They want to know the rules governing their activities, the rights they enjoy, and the obligations they must fulfill. Saqr asked: Is it sufficient for a state to enact a specific investment law to become attractive to investors? I answered: Not necessarily. Investors do not deal with a single law, but with an integrated legal system. They need clear rules regulating licenses, property ownership, labor, taxes, commercial contracts, and dispute resolution mechanisms. An investment law may be encouraging, but trust is also built through the other laws and procedures that investors encounter in their daily operations. Saqr asked: What about the incentives and facilitations that states offer to attract capital? I replied: Undoubtedly, these are important factors and may influence an investor’s choice of one country over another. However, incentives may open the door for investors, while trust is what encourages them to stay. Investors do not only want to know what they will receive upon entering the market; they also want to understand what awaits them afterward, how their relationship with relevant authorities will be managed, and what legal guarantees are available to protect their legitimate rights. Saqr asked: Does this mean that the investor’s interest should take precedence over the state’s interest? I replied: Quite the opposite. Successful investment is not based on prioritizing one party’s interest over the other, but on achieving a balance between them. The state has its interests, rights, and sovereignty in regulating its economic affairs, while investors, in turn, have rights and obligations governed by laws and contracts. When this relationship is clear and balanced, investment becomes a mutual benefit. Saqr asked: But laws change as life and the economy evolve. Does this not affect investor confidence? I replied: It is natural for laws to evolve to keep pace with changes. Legal stability does not mean that legal texts remain unchanged forever, but that their development is thoughtful and transparent, while respecting existing rights, legal statuses, and obligations. The problem is not the evolution of the law, but rather the ambiguity of rules or the inability to anticipate their effects. Saqr asked: What about transparency? We often hear that it is a key factor in attracting investment. I replied: Because it provides investors with a clear picture of the environment they are entering. Imagine an investor submitting an application to establish a project without knowing the required procedures, the expected timeline, or the criteria on which decisions will be based. Clear procedures, ease of access to information, equal opportunities, and integrity in dealings are all elements that enhance trust. In addition, effective oversight, anti-corruption rules, and clear and fair dispute resolution mechanisms strengthen this foundation. These guarantees ensure that the relationship between the state and investors is based on understandable legal and institutional foundations. Saqr asked: When can we say that a state has truly succeeded in attracting investment? I replied: When success is not limited to the inflow of capital, but extends to the continuity and expansion of projects and the achievement of tangible results. Investment is not merely numbers in statistics; it can be a source of job creation, technology and expertise transfer, industrial development, market stimulation, and income growth.

Here, the most important objective is achieved: investment becomes a partner in development, and its benefits return to the state, the investor, and society. Saqr paused briefly, then said: “Now I understand. The success of the investment environment is not measured solely by the incentives it offers, but by the trust it builds.” I replied to him: “Yes, Saqr. The law is not merely a set of provisions regulating relationships; it is one of the foundations upon which trust between the state and those who engage with it is built.”