Set to grow 10% over the next 5 years, says fDi Intelligence
Global greenfield foreign direct investment (FDI) market is starting to recover following years of decline, registering an increase of 5.9 per cent in to reach $585 billion in 2013, according to the latest report.
Prepared by the fDi Intelligence, a division of the Financial Times, and released on the first day of Annual Investment Meeting in Dubai on Tuesday, the report said Middle East experienced an increase in greenfield investment albeit lower than other regions. The Middle East received $46.8 billion FDI in 2013 compared to $32.6 billion in the previous year.
The Annual Investment Meeting (AIM 2014) was inaugurated on Tuesday by His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE, Ruler of Dubai at the Dubai International Convention and Exhibition Centre where it was attended by representatives of official delegations from more than 110 countries.
According to Investopedia, greenfield FDI is a form where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up. In addition to building new facilities, most parent companies also create new long-term jobs in the foreign country by hiring new employees.
Angus Cushley, Publishing Director of fDI Intelligence at Financial Times, said while releasing the report that the prospects are good as global FDI is set to grow on average eight per cent per annum over the next five years (2014-18) and FDI inflows to grow by at least ten per cent per annum over the same period.
Emerging markets will continue to attract over half of FDI flows, North America is expected to grow the fastest over the period with strong growth in energy investments. Africa and the Middle East are also expected to achieve strong growth in inward FDI of at least 10 per cent per annum over the next five years as FDI in Middle East recovers from the global financial crisis and political instability.
Outward FDI from the Middle East is also expected to recover and the region will experience the fastest growth in outward FDI flows out of any region.
UAE's Minister of Economy Sultan bin Saeed Al Mansoori said more than ever, emerging markets are on the driving seat. Their growth rates advantage is still predominant, albeit somewhat lower than in preceding years.
"Developing economies claimed the largest share of international investments made by businesses for the second consecutive year in 2013 and are likely to do so again in 2014 despite slower growth, political uncertainty and turbulence in their financial markets.
"Out of the top 10 FDI recipients in 2013, 8 were emerging markets including China, Russian Federation, Hong Kong, Brazil, Singapore, Mexico, India and Indonesia," he added.
Global M&As
The report revealed that global corssborder merger and acquisition (M&A) activity in 2013 fell by 10 per cent. A total of $786.1 billion in corssborder M&A deals were announced last year with total of deals falling slightly to 4,751.
The Middle East also had a decline in crossborder M&A deal value in 2013 with M&A falling sharply by 40.1 per cent to $19.1 billion 2013. However, M&A in 2013 is similar to the historic average of $22.9 billion per year from 2009-11.
The M&As in the region accounted for 2.4 per cent of the total of value of M&A deals in 2013.
Among the 10 highest valued crossborder deals involving Middle East-based companies in 2013 three involved UAE companies.
The region's biggest deal last year was Etisalat's $6.1 billion bid for Marco Telecom. The second deal involving UAE company was Adia buying 42 Marriott Hotels for $970 million while third was Philip Morris International of US bidding $630 million for UAE's Arab Investors-TA FZC.
© Emirates 24|7 2014
