Foreign direct investment volume reaches Dhs31.465bn in Abu Dhabi

FDI refers to all investment projects being developed by foreign investors as the sole owners or in partnership with local investors, often in the form of international companies that contribute to the transfer of modern technology, expertise and best practices in development of management and the opening of new markets.

It is worth mentioning that carrying out statistical field surveys is considered to be one of the central areas of SCAD's strategic business objectives and strategy, as well as an integral part of its active participation in supporting Abu Dhabi's development vision in the development and organization of the overall statistical work in the emirate of Abu Dhabi.

Mr. Abu Baker Al-Amoudi - Director Statistics Sector at Statistics Center - Abu Dhabi asserted that the Emirate of Abu Dhabi is

"experiencing a distinct, qualitative development in foreign direct investment and has become a hub for the activities of giant international companies looking forward to grow at the regional and global scales amidst the strong economic environment enjoyed by the Emirate of Abu Dhabi, which translates Abu Dhabi Government's commitment to achieving its vision to assume leading position among the best five governments in the world, and to build a globally competitive economy through sustainable growth and continued efforts to provide an ideal investment climate for local and international investors driven by an optimal working environment, and diverse investment opportunities"

The results of the FDI survey showed that the total volume of foreign investment in the Emirate of Abu Dhabi in 2007 was about Dhs31,465bn, of which real estates and rents contributed the largest share, namely, Dhs11,840bn or 38% of the volume of FDI, followed by the water and electricity, which contributed Dhs6.157bn, i.e. 20% of total FDI for the year under review, then the financial intermediation and insurance activity at Dhs4.565bn or 15% of total FDI for 2007, while restaurant and hotels contributed a tiny 0.14% (Dhs45m) of FDI for the year under review.

Is noteworthy that FDI has gained increasing importance over the past few years of, becoming one of the most important sources of finance in developing countries, especially in light of the increasing volume of external indebtedness and the decline in international lending, after having played an important role in financing investment in developing countries during the seventies. FDI has now emerged as an alternative to loans.

In this regard, Mr. Al-Amoudi remarked: "The major global developments and transformations during recent years, especially on the economic front, have presented formidable challenges and limited choices to developing countries. The most distinct features of this phase consisted in the acceleration of the phenomenon of globalization, which was the logical consequence of the period of economic liberalization, adoption of market economy over the last two decades, the dismantling of barriers between countries, the mutual opening up of world economies, and the emergence of major international conventions and economic blocs and organizations".

The survey results revealed that foreign FDI from GCC states had reached Dhs257m or 0.8%, representing the smallest proportion of FDI in Abu Dhabi classified by groups of countries. Investments from the rest of the Arab countries amounted to Dhs2,160bn, which makes up 6.9% of the total FDI, while Asian countries invested Dhs2.699bn (8.6%). FDI from European countries amounted to Dhs11.816bn, representing 37.6%, the largest percentage of total FDI for the year in question. As for North and South America, FDI came solely from Canada, USA and Panama and amounted to Dhs2300m (7.3% of the total), while FDI from other countries reached Dhs12.234bn and accounted for 38.9% of total FDI, which included investments of all countries in the real estate sector.

According to the survey results, classified by countries of origin, investments from the United Kingdom were estimated at Dhs7.454bn, which constitutes 23.7%, the highest percentage among the countries investing in the Emirate of Abu Dhabi. Followed by Austria, which invested Dhs1.585bn (5.04%). Japan and Libya invested Dhs1,451bn and Dhs1,116bn or 4.61% and 3.55% of FDI for 2007, respectively, while Australia invested Dhs2.3m, which constitutes only 0.01%, the lowest percentage for a single country. Investments by other countries, including the real estate sector amounted to Dhs12.231bn or 38.87% of the total FDI in the Emirate of Abu Dhabi.
Mr. Al-Amoudi further explained "According to income payments of foreign investment enterprises, classified by economic activity, manufacturing industries topped the list with payments amounting to 20.61% as of payments or Dhs3,016bn, followed by the extractive industries (mining and quarrying), whose payments amounted to Dhs2,436bn (16.64%), then water and electricity at Dhs2.262bn or 15.45%. The transport and communications sector posted a negative value of Dhs381m, while the value of payments by other sectors totaled Dhs5.519bn or 37.7% of income payments from foreign investment institutions in the Emirate of Abu Dhabi"

The survey results, the purchase of goods and services in enterprises was distributed between direct imports and local purchases, with the mining and quarrying activity accounting for largest proportion of purchases (Dhs16.344bn or 49.4% of total ). On the other hand local purchases of the mining and quarrying sector made up 93% of the total, followed by the construction industry, which placed purchases at Dhs7.587bn or 22.9% of the total purchases of FDI enterprises. The local purchases of this sector accounted for 37.1% of the local purchases of FDI enterprises. The manufacturing and the water and electricity sectors placed purchases worth Dhs2,182 and Dhs2,839bn at (6.6% and 8.6% of total FDI purchases), respectively. The local purchases of these sectors accounted for 36.6% and 96.5%, respectively of the total purchases of each sector. The lowest proportion of purchases was in the financial intermediation and insurance sector, at Dhs114.1m, which makes up only 0.3% of the total purchases of the total purchases procured by FDI enterprises. However, 100% of the purchases of the said sector were ordered from the local market.

The total purchases of FDI enterprises were Dhs33,090bn, of which 76.1% were local purchases. The survey also showed that the total sales of goods and services of FDI enterprises had amounted to Dhs223,206bn of which 90.5% were local sales, led by the mining and quarrying sector, which secured 83% (or Dhs185,171bn) of the total FDI sales, of which 93.1% were domestic sales, followed by the construction industry, whose sales amounted to Dhs19.051bn or 8.5% of the total sales of FDI enterprises, 80.7% of which were marketed locally. Next were the manufacturing industries and electricity and water sectors, which achieved sales worth Dhs4,786 and Dhs4,309bn, i.e. 2.1 % and 1.9% of total sales of FDI enterprises, respectively. The local sales the two sectors were 12.2% and 100% respectively. The lowest percentage of sales by FDI enterprises was recorded by the financial intermediation and insurance sector, which accounted for only 0.2%, with 97.9% of the sales of thi sector marketed locally.

Mr. Abu Bakr Al-Amoudi, Director of the Statistics Sector at SCAD pointed out that the manpower employed by FDI enterprises in the Emirate of Abu Dhabi had reached 77,985 employees, the largest employer being the construction sector, which engaged 50,461 workers or 65% of the total FDI manpower, followed by the mining and quarrying sector with 11,382 workers (15% of the total), while the manufacturing industries sector employed 3,800 workers, making up 5% the total manpower employed FDI enterprises.

Mr. Al-Amoudi added that the compensation of the staff of FDI enterprises had reached a Dhs6.425bn, the largest percentage of which (56% or Dhs3.597bn) went to the employees of mining and quarrying industries, suggesting the high rates of compensation paid to workers in this sector. On the other hand the total compensations for the workers in the construction and contracting sector amounted to only Dhs930.1m, or 14% of the total, although the sector employs 65% of the total FDI enterprises manpower, while the employees of the mining and quarrying sector account for only 15% of the total. The lowest rate of compensation was observed in the wholesale and retail trade sector, which accounted for 1% (or Dhs77.9m) of the total compensation in FDI enterprises.

Finally, the results of the survey revealed that the payment of dividends in FDI enterprises amounted to Dhs2.419bn of which the mining and quarrying industry accounted for 40.56% (or Dhs981,091m), while the water and electricity sector paid dividends worth Dhs632,985m, which makes 26.17%. The lowest dividends payment was observed in the manufacturing industries sector at Dhs0,345m of the total FDI dividends payments.

Interest payments for FDI enterprises Dhs269m, mostly in the water and electricity sector, which accounted 95% or Dhs254,949m of FDI interest payments, while the in the case of mining, wholesale and retail trade, restaurants and hotels, transport, storage and communications there were no interest payment during the year under review.