UAE and Saudi Arabia take lion's share of $233bn FDI into GCC
Gulf oil producers have attracted in excess of $233 billion (Dh855.8bn) in cumulative foreign direct investment (FDI) and the major part of the capital has been pumped into the UAE and Saudi Arabia, according to official figures.
The six Gulf Co-operation Council (GCC) countries, which control around 45 per cent of the world's proven oil deposits, have received most of the investments over the past five years, when their economies recorded one of their highest growth rates because of strong oil prices.
Saudi Arabia, the world's oil basin, emerged as the largest capital destination in the GCC and the Arab World, receiving nearly $114.2bn, just below half the total FDI pumped into the GCC, showed the figures by the United Nations Conference on Trade and Development (Unctad).
The UAE was the second largest recipient, with about $69.4bn, followed by Qatar, with nearly $22bn.
Bahrain came fourth with total FDI of about $14.8bn while Oman has received about $11.9bn.
Kuwait far lagged behind other GCC members although it is one of the world's largest oil producers, with total investments standing at only $991 million.
The figures showed more than $90bn in direct investments in Saudi Arabia have been received during 2004-2008 as the kingdom basked under one of its best fiscal and economic years and pushed ahead with a drive to attract capital within reforms aimed at diversifying its oil-reliant economy.
The UAE also received more than $60bn of its FDI during that period as capital exporters took advantage of its surging economy, investment incentives and the opening up of more sectors to foreign investors, including real estate.
FDI in Saudi Arabia hit an all time high of $38.2bn while it stood at $13.7bn in the UAE, slightly lower than its record high FDI of $14.1bn in 2007.
Unctad gave no estimates for the expected FDI in 2009 but according to a key Arab League financial organisation, investment flow into the Gulf and other Arab nations is projected to slow down this year due to the global fiscal distress.
After surging by around 27 per cent to nearly $89bn in 2008, foreign investment flow into the Arab region is forecast to recede this year, said the Kuwaiti-based Inter-Arab Investment Guarantee Corporation (IAIGC).
FDI flow in the GCC and other Arab states was much higher in 2008 despite a sharp slowdown in the second half of the year and it followed several years of steady growth in capital flow into many Arab countries because of high oil prices, a surge in regional projects and improvement in investment laws, IAGIC said.
"As for 2009, FDI flow into the Arab region is expected to decline due to several factors, including the slowdown or contraction in the economies of industrial nations, which have constituted a major source of investment for Arab states over the past few years," IAIGC said in its latest report on Arab investment.
"Another factor is the possible continuation of turbulence in Arab and global markets as this will contribute to increasing uncertainty regarding investment decisions in the medium and long terms and to shelving of more projects in the region in infrastructure, hydrocarbon, and real estate sectors."
The report said a sharp fall in the oil export earnings of Gulf nations would also adversely affect their capital flow into other Arab League members, adding that inter-Arab investments are key components of FDI flow into regional states.
It also expected a decline in foreign investment flow into oil and gas projects in some Arab countries in case of a prolonged global financial crisis.
"This will naturally lead to a decline in investment projects in the region particularly those which had been planned to expand the crude output capacity. Many of such projects could be put on hold because of weak crude prices and the slackening global demand as a result of the crisis," the report said.
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