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28 March 2024

UAE FDI flow set to recover after 2009 decline

Global money flows picking up again (Supplied)

Published
By Nadim Kawach

Plans to enact more liberal investment laws will ally with a recovery in the real estate sector to push up foreign capital flow into the UAE following a sharp slowdown in 2009, according to an official report.

Foreign direct investment (FDI) attracted by the UAE slumped by nearly 71 per cent in 2009 after climbing to one of its highest levels in the previous years but it is projected to slightly pick up this year, said the report by the Arab League’s Inter-Arab Investment Guarantee Corporation (IAIGC).

From about $four billion in 2009, FDI flow into the UAE, the second largest Arab economy after Saudi Arabia, could edge up to nearly $4.1 billion this year, the Kuwaiti-based group said in its quarterly bulletin.

“FDI flow into the UAE is expected to slightly rise this year after a sharp fall last year…there will be stability and even better flows in the next years with the enforcement of the new corporate law which will ease ownership restrictions on foreign investors and could give them 100 per cent ownership in some projects,” the Kuwaiti-based IAIGC said in the bulletin, released this week.

“Another positive factor is the gradual recovery of the real estate sector, which has recorded a sharp downturn since the eruption of the crisis…this will be supported by the emerging vast investment opportunities as a result of the government’s plans to carry out large infrastructure projects.”

The UAE has emerged as the largest Arab FDI recipient after Saudi Arabia, attracting nearly $73.5 billion over the past four decades.

Saudi Arabia, the world’s dominant oil exporter, was the top investment target in the region, receiving nearly $114 billion, a quarter of the total Arab FDI inflow.

According to UNCTAD, the sharp decline in FDI flow into the UAE last year was a result of the global crisis, regional economic uncertainty and DW’s debt issue.

“Among the main recipient countries in the Middle East, the UAE and Turkey were hit the hardest, with declines of 71 and 58 per cent, respectively… the Dubai debt crisis explains the FDI collapse in the UAE,” UNCTAD said.
IAIGC expected a sharp rise in FDI flow into Saudi Arabia from around $35.5bn in 2009 to $42.6bn in 2010, an increase of about 20 per cent.

Qatar’s FDI is projected to grow by around three per cent to $nine billion from $8.7bn while that into Kuwait could slide by 31 per cent to turn into a negative balance of around $45 million. But the report said the position could be sharply reversed in case the UAE’s Etisalat completes a proposed $12bn deal to acquire around 46 per cent of the telecommunication firm Zain.

IAIGC forecast a 338 per cent jump in FDI into Mauritania and 171, 111 and 94 per cent growth in FDI for Yemen, Djibouti and Morocco respectively.

It expected growth at 29 per cent for Syria, 19 per cent for Egypt,18 per cent for Bahrain, 13 per cent each for Oman, Iraq and Libya,  and 12 per cent for Palestine. Growth was estimated at five per cent for Jordan and two per cent for Tunisia. The report expected FDI flow into Lebanon to dive by 18 per cent.