UAE remains a prime destination for FDI

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The UAE has attracted more than $51 billion (Dh187bn) in foreign direct investment (FDI) in four years to maintain its position as the second largest FDI destination in the Arab region, according to official data.

In 2008, the UAE accounted for around 14.2 per cent of the total FDI of about $96.48bn pumped into the Arab World, showed the figures by the Kuwaiti-based Inter-Arab Investment Guarantee Corporation (IAIGC).

Despite a slight fall in FDI flow last year compared with 2007, the UAE was ranked second after Saudi Arabia in the region in terms of FDI in 2008 and the previous three years, IAIGC said in its monthly bulletin.

The figures showed cumulative FDI into the UAE totalled $51.4bn during 2005-2008 while the flow was put at about $92bn in Saudi.

FDI flow into the UAE hit a record high of $14.18bn in 2007 and had recorded a steady growth over the previous 10 years before it reversed that trend last year in the last quarter due to the global downturn.

Saudi Arabia, the world's largest oil exporter, attracted nearly $38.2bn in FDI last year, an increase of as high as 57 per cent over the previous year.

During 2005-2008, cumulative FDI flow into the Gulf Kingdom totalled about $92bn, the top destination of FDI in the Arab World and one of the most attractive investment markets in the developing nations, according to IAIGC. The report showed Egypt was the third largest Arab FDI destination, attracting around $9.4bn in 2008 and nearly $11.5bn in 2007.

Qatar, the third largest gas power in the world, ranked fourth with around $6.7bn last year and about $4.7bn in 2007.

FDI last year was estimated at $4.1bn in Libya, $3.6bn in Lebanon, $2.9bn in Oman, $2.76bn in Tunisia, $2.6bn in Sudan, $2.38bn in Morocco and about $2.11bn in Syria.

As for the whole Arab region, the report showed capital flow soared by around $16bn to a record $96.4bn in 2008 despite a sharp slowdown in worldwide investments in the second half of 2008 due to the global crisis.

"It is clear that the global financial crisis has not affected the capability of Arab countries in attracting investment last year."

The increase boosted the share of Arab states in global FDI to 5.3 per cent in 2008 from 3.9 per cent in 2007 and only 0.4 per cent in 2000.

The figures showed a surge in inter-Arab investments was the main factor in the total FDI growth in the region, as they jumped by around 64 per cent to $34bn in 2008 from about $21bn in 2007.

"Gulf countries have remained the main source of inter-Arab investments while new players emerged on the arena in 2008, including Egypt and Lebanon."

But IAIGC, a key Arab League group, expected FDI flow into the region to slacken in 2009 for the first time in many years because of the crisis.

"As for 2009, FDI flow into the Arab region is expected to decline due to several factors, including the slowdown or contraction in the economies of industrial nations, which have been a major source of FDI for Arab states over the past few years," IAIGC said.

By Nadim Kawach

© Emirates Business 24/7 2009