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29 March 2024

Arab FDI up 7 times in 2005-2010

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By Staff

Reforms carried out by several Arab countries boosted foreign direct investment (FDI) into the region by nearly seven times during 2005-2010 but many of them still have investment barriers, an Arab official has said.

FDI into the region, which controls over 60 per cent of the world’s recoverable oil deposits, totalled around $438.5 billion during 2005-2010 compared with only 67.2 billion during 1999-2004, said Fahd Ibrahim, director general of the Kuwaiti-based Inter-Arab Investment Guarantee Corporation (IAIGC).

Writing in the IAIGC bulletin, Ibrahim said the surge was due to a large improvement in the investment climate in the Arab world mainly because of reforms, adding that his Arab League group has recorded nearly 120 reform procedures in the Arab region over the past three years.

He said such reforms also boosted inter-Arab investment by nearly six times to $138.1 billion from $19.4 billion in the same period.

“Besides increasing FDI into the region, these reforms contributed to offsetting the negative repercussions of the 2008 global fiscal crisis and the present political upheaval in the region,” he said.

“Yet the share of the Arab region from global FDI remained low, not exceeding five per cent…it also has not reached the required level considering the massive financing needs in the Arab countries…this means the Arab world is still suffering from investment obstacles and this should prompt them to carry out more reforms, particularly in the field of improving the business environment.”

In a previous study, IAIGC said it expected FDI into the Arab states to slump in 2011 because of the region’s political unrest and global financial problems.

Its forecasts showed total FDI into the 21 Arab League nations would dip to nearly $55 billion in 2011 from around $66.2 billion in 2010, a decline of nearly $11.2 billion or around 16.7 per cent.

The level is expected to be the lowest since 2005, when FDI stood at $47 billion. It will also be way below the record high FDI flow of around $96.7 billion in 2008.

“This is because the current situation has thrown the region into a state of uncertainty in the short term although many world companies still view the investment climate in rich Arab nations, mainly those in the Gulf, as attractive….the global fiscal turmoil could also affect FDI flow into the region in the medium term but this could be offset in case oil prices remain high and some regional governments maintained their high capital spending levels.”

A breakdown showed most Arab states would suffer from lower FDI flow but countries which have been hit by turmoil would be the main victims.

Only six members are expected to record a slight recovery, including the UAE, which is expected to attract around $four billion in 2011 against $3.9 billion in 2010. Saudi Arabia, the largest Arab economy, is also expected to see a slight rise to around $29 billion from $28.1 billion while the other likely gainers are conflict-battered Iraq, Kuwait, Morocco and Mauritania.