The UAE has risen to an impressive eighth place on the AT Kearney global Foreign Direct Investment Confidence Index with 2006 FDI in the UAE amounting to $8.4 billion (Dh30.8bn).
However, the Middle East economies are still far behind countries such as Singapore in attracting foreign direct investment (FDI), even though investors around the world are optimistic about the prospects for emerging markets and are increasingly targeting them for more investments, a research said.
A fast-growing population combined with reduction in government bureaucracy and the introduction of financial and tax incentives have translated into investor optimism and increased investments in the Middle East, as indicated by the most recent FDI Confidence Index released by AT Kearney.
While FDI in the Middle East accounted for some $60bn in 2006, the UAE is a main example of a few Middle Eastern countries aggressively attracting FDI through their increasingly liberal and international economy and more specifically through the successful implementation of attractive free zones.
“Despite Jordan pursuing a set of economic development strategies to promote national economic development, it has a long way to go,” said Dr Dirk Buchta, Vice-President and Managing Director of AT Kearney Middle East.
In comparison to neighbouring countries such as Lebanon, Jordan has performed relatively well attracting over $3bn of FDI in 2006 (more than 100 per cent increase from 2005) as reported by Unctad.
However, it lags behind the UAE, having not nearly attracted half the amount of the latter.
A majority of the 2006 FDI increases into Jordan were attributed to a few major privatisation initiatives that attracted large interest from regional (mainly Gulf) investors leaving not nearly enough to be directed to Greenfield initiatives.
With its lack of abundant natural resources and its limited ability to provide attractive tax exemptions and other incentives, Jordan has struggled to differentiate itself from other global FDI benefiting countries in attracting long-term, value creating investments and must urgently determine how to remain competitive to secure larger shares of future global FDI spends going towards competitive and sustainable economic programmes.
Currently the driving force behind Jordan’s economic development strategy is to reduce the most challenging problems facing its economy – unemployment and the country’s social situation.
“The investment drive so far has included the development of a large number of investor-friendly economic zones – including public free zones, private free zones, and a special economic zone in Aqaba.
“However, the drive to finance economic development projects and the challenges in setting up the right infrastructure and skills are some of the most pressing obstacles facing Jordan,” added Dr Dirk Buchta.
UAE in eighth spot in AT Kearney’s international FDI survey