UAE overtakes Saudi as top FDI recipient in GCC

The UAE continued to attract foreign direct investments (FDIs) in 2013, rising nine per cent to $10.5 billion last year, the United Nations Conference on Trade and Development (Unctad) said in its latest report.

The report said FDI flows to the UAE continued their recovery after the sharp decline registered in 2009, increasing in 2013 for the fourth consecutive year and positioning the country as the second largest recipient (after Turkey) of FDI in the Middle East.

Flows to Saudi Arabia registered their fifth consecutive year of decline, decreasing by 24 per cent to $9.3 billion, and moving the country from the second to the third largest recipient economy in the region.

This FDI recovery coincided with the economy rebounding from the 2009 lows, driven by both oil and non-oil activities. Among the latter, the manufacturing sector expanded, led by heavy industries such as aluminium and petrochemicals; tourism and transport benefited from the addition of more routes and capacity by two local airlines; and the property market recovered, thanks to the willingness of banks to resume loans to real estate projects, which brought new life to the construction business, the industry that suffered most from the financial crisis and has taken the longest to recover.

That industry got further impetus in November 2013, when Dubai gained the right to host the World Expo 2020, Unctad said in its World Investment Report 2014.

FDI outflows from the UAE reached $2.9 billion in 2013 as compared to $2.53 billion in the previous year. The UAE FDI inflows peaked in 2013 when they reached $13.7 billion.

Middle East

FDI flows to Middle East decreased in 2013 by nine per cent to $44 billion in 2013, failing to recover for the fifth consecutive year.

Persistent regional tensions and political uncertainties are holding back investors, although there are differences between countries.

In Saudi Arabia and Qatar, FDI flows continue to follow a downward trend; in other countries FDI is slowly recovering, although flows remain well below earlier levels, except in Kuwait and Iraq where they reached record levels in 2012 and 2013, respectively.

FDI outflows from Middle East jumped by 64 per cent in 2013, driven by rising flows from the GCC countries. A quadrupling of outflows from Qatar and a near tripling of flows from Kuwait explained most of the increase. Outward FDI could increase further given the high levels of GCC foreign exchange reserves.

FDI outflows from Middle East soared 64 per cent to $31 billion in 2013, boosted by rising flows from the GCC countries, which enjoy a high level of foreign exchange reserves derived from their accumulation of surpluses from export earnings.

Although each of these countries augmented its investment abroad, the quadrupling of outflows from Qatar and the 159 per cent growth in flows from Kuwait explain most of the increase. Given the high levels of their foreign exchange reserves and the relatively small sizes of their economies, GCC countries are likely to continue to increase their direct investment abroad.

 

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