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The UAE is ranked 19th on the 2020 Kearney Foreign Direct Investment (FDI) Confidence Index thanks to its overall strong business environment and the economic stability in the emirates.
The UAE returns to the Index after a two-year absence and has moved up by two spots from its rank in 2017. Economic indicators in the country are strong, and growth reached 2.4 percent in 2019, up from 1.7 percent in 2018.
It is the only country from the Middle East and North Africa region to feature in the first 25 ranks.
The top 10 countries on the Index remain unchanged from 2019, save for Switzerland joining the top group and Singapore falling to the 12th spot. The US tops the 2020 Index for the eighth year in a row. Canada retakes the number two position, and Germany falls to third. The UK moves down to sixth place, and France maintains its fifth place.
The downward effects of the COVID-19 pandemic on direct investment was evident on the survey conducted by Kearney between January 27 and March 3.
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Eighty-two percent of investors plan to increase their foreign direct investments over the next three years, and they have similar levels of interest in seeking new investments across all types of markets.
While 53 percent say their companies are seeking new investment opportunities in emerging markets, 52 and 47 percent of investors say the same for both developed and frontier markets, respectively, Kearney said.
According to Kearney, respondents of the survey were likely attracted to the UAE’s continued efforts to diversify its economy away from oil.
However, regional dynamics are rather negative, as the COVID-19 pandemic sent economies in a downspin after the investor survey had concluded. The Gulf Cooperation Council (GCC) region is expected to contract by 7.0 percent this year and will be especially hurt by a COVID-induced crash in oil prices.
The coronavirus, however, will push down UAE’s 2020 performance to a projected growth rate of –7.8 percent, the report said.
“As is the case in most commodity-exporting markets, plunging oil prices that dropped consistently after the survey represent a key risk to the economy and foreign direct investment moving forward,” the report said.
The overall strong business environment was boosting its foreign investment attractiveness, and this economic stability should support the business environment post-COVID as well.
Indeed, the World Bank’s Doing Business 2020 report ranked the UAE at 16 out of 190 countries, noting that the country has reduced fees involved in starting a business there and made international trade easier, Kearney noted.
Last year, The UAE cabinet has approved 122 economic activities across 13 sectors eligible for up to 100 percent foreign ownership —including manufacturing, agriculture, and renewable energy. "This initiative expanded the landmark 2018 foreign investment law, which significantly relaxed foreign investment requirements. The overall strong business environment was boosting its foreign investment attractiveness, and this economic stability should support the business environment post-COVID as well," Kearney report said.
“Investors clearly anticipate that these fundamentals combined with an extremely effective response to the crisis will enable the country to emerge strongly from the current situation,” said Rudolph Lohmeyer, partner at the National Transformations Institute of Kearney Middle East.
The UAE also saw some notable M&A deals in 2019. Italian oil and gas company Eni acquired a 20 percent equity interest in the Abu Dhabi National Oil Company for $3.3 billion. And the country’s technology sector also experienced some strong activity, with the United States’ ride-sharing firm Uber Technologies Inc. acquiring the UAE’s online car booking service Careem Networks FZ LLC for $3.1 billion.
The UAE was also expected to benefit from the entry into force of the Africa Continental Free Trade Area (AfCFTA) through new trade opportunities with African countries, though COVID-19 has delayed the timeline for the agreement, the report noted.
Though the Dubai 2020 Expo has been postponed until 2021, the event could stimulate foreign investment in innovative small businesses in the country, Kearney said.
(Reporting by Seban Scaria; editing by Daniel Luiz)
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