Foreign Direct Investment to UAE tops the charts

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UNCTAD: Foreign Direct Investment (FDI) inflow to the United Arab Emirates increased by 25 percent in 2012 to USD 9.6 billion.

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High public spending by Abu Dhabi and a strong performance by Dubai’s non-hydrocarbon sectors helped rebuild foreign appetites for FDI in UAE. Photo-Aziz J Hayat/Flickr

West Asia’s third largest recipient country, the UAE, increased FDI inflow by 25 percent to USD 9.6 billion, continuing a recovery initiated in 2010 but which remained below the 2007 level of USD 14 billion, says the latest report by the United Nations Conference on Trade and Development (UNCTAD).

The report, which is subtitled Global Value Chains: Investment and Trade for Development was released on Wednesday by Geneva-based UNCATD.

Despite the strong decline registered in Saudi Arabia, FDI inflows to Gulf Cooperation Council (GCC) countries as a whole remained at almost the same level in 2012 ($26 billion), because of significant FDI growth in the other GCC nations.

FDI flowing into West Asia in 2012 continued a downturn turn that began in 2009, the UNCTAD World Investment Report 2013 reveals. FDI to the West Asia region decreased by 4 percent in 2012 to USD 47 billion — half the level of 2008.

High public spending by Abu Dhabi and a strong performance by Dubai’s non-hydrocarbon sectors helped rebuild foreign appetites for FDI in that country.

Saudi Arabia and the United Arab Emirates alone accounted for 83 percent of FDI inflows to the GCC economies. FDI to Kuwait more than doubled, reaching USD 1.9 billion. FDI inflows also increased in Bahrain, Oman and Qatar, the report says.

FDI to non-GCC countries in West Asia declined by 9 percent to USD 21 billion, due to the large FDI drop in Turkey. Lower global growth and a prolonged fiscal tightening in the European Union – Turkey’s largest market – have reduced demand for Turkey’s exports, thus affecting export-led FDI, the report indicates.

Separate from the situation in Turkey, most countries in the non-GCC group saw increased FDI inflows, the report reveals.

This was the case for Iraq, where FDI in 2012 was up for the second consecutive year, increasing by 22 percent to USD 2.6 billion, attracted by the country’s strong economic growth (8.4%) which has been aided by significant increases in government spending. With its considerable hydrocarbon wealth, large population, and massive infrastructure investment needs, Iraq offers a wide range of opportunities for foreign investors, who are progressively investing despite the country’s political instability and security challenges.

Lebanon also registered positive FDI growth (9%), enhanced by foreign acquisitions in the insurance industry and in services related to real estate.

FDI to Yemen swung back from a negative to a positive value in 2012 ($349 million), as investors were encouraged by the settlement of that country’s political crisis, while FDI to Jordan declined by 5 percent.

Outward FDI from West Asia decreased by 9 percent to USD 24 billion in 2012, putting a halt to the previous year’s recovery, the report notes. While GCC countries continued to account for most of the region’s outward FDI flows, Turkey emerged as a significant investor, with the amount of its outward investment growing by 74 percent to a record USD 4.1 billion.

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