UAE rakes in $19.4bn FDI

Foreign funds inflows into the UAE hit a high of $19.4 billion (Dh71.1bn) in the past three years, according to the World Bank.

Capital flows into Gulf oil producers have rocketed to nearly $59bn over the past three years. Of this, the major portion went to Saudi Arabia, which received around $43.1bn.

Foreign direct investments (FDI) during 2005-2007 were more than eight times the FDI flow into the GCC during the previous nine years, the World Bank said.

Saudi Arabia and the UAE, which have the bulk of the investments, have been locked in reforms to diversify their oil-reliant economies by opening up most of their sectors, privatising public enterprises and expanding their industries.

Their combined FDI of $62.5bn surpassed the total FDI in the GCC and the whole Middle East and North Africa (Mena).

The report explained some countries recorded negative growth in FDI inflow. It showed that Kuwait was the main victim as it recorded higher capital outflow during the past three years, standing at around $19.1bn, which depressed the combined Gulf FDI.

Qatar, which recorded the highest economic growth rate in the region over the past few years because of surging LNG exports, ranked third with FDI totalling around $10.7bn. Oman recorded relatively small FDI inflow, while Bahrain, one of the most liberal economies in the Middle East, attracted around $3.9bn. But there was a capital outflow of nearly $100 million in 2005.

The World Bank attributed the sharp rise in FDI in the GCC and some other Arab countries to reforms and high economic growth due to the surge in oil prices.

Higher growth was also recorded in some oil-importing Arab nations because of reforms.

"Sustained economic growth in conjunction with economic diversification and ongoing reforms and privatisations attracted large FDI flows to Mena," it said.

"Both resource-rich and resource-poor countries received larger FDI flows relative to previous years… however, FDI flowing to oil exporting economies had been much stronger over the three years leading up to 2006… as a result, flows to oil producing countries overtook flows to oil importing countries in 2005."

The report said revised figures for 2006 showed that the Mena region experienced a sharp increase in FDI flows to a record $51.6bn, up by nearly 66 per cent over the 2005 FDI flow of around $31.1bn.

In 2007, FDI slipped to $45.4bn but remained high compared to the period during 1996-2004.