FDI inflows to the Arab world increase, says UNCTAD's World Investment Report 2004

Dubai today joined New York, Geneva, Delhi and Tokyo, in the release of the eagerly awaited and much respected World Investment Report 2004 from the United Nations Conference on Trade and Development (UNCTAD).

"We are extremely pleased to be counted among the major cities of the world where this report was released simultaneously. UAE is growing rapidly and this is being recognised by major institutions such as UNCTAD, which are increasingly using UAE as a springboard to launch their major initiatives in the region," stated Mohammed Al Gergawi, Chairman of the Board of Dubai Development and Investment Authority (DDIA). The DDIA released the details of the report in UAE today.

Explaining about the findings of the UNCTAD World Investment Report, Al Gergawi said: "The report says that the six GCC countries attracted FDI flows of US $1.81 billion during 2003, which is higher by a massive 64 per cent from the US $1.097 billion net FDI inflows into the Gulf last year.

"However, though the Arab world has done well, in relative terms the flow of $1.81 billion to the Gulf in 2003, is simply not enough when compared to $560 billion that was generated globally. Even the $7.35 billion that the entire Arab world received in 2003, is but a drop in the ocean of funds that travelled the world in 2003 looking for investment opportunities," the DDIA Chairman pointed out.

Global FDI flows had stood at US$ 651.18 billion in 2002, and the share of the Arab World was $ 4.6 billion.

14 in Top-100 Potential Index
For 2003, Al Gergawi said, 14 of the 22 Arab countries found themselves in the Top-100 ranking on the UNCTAD FDI Potential Index, which places countries on the basis of their attractiveness to FDI. The UAE ranked 17th on the list.

"In the Arab world, the UAE -- and particularly the booming emirate of Dubai -- presents several potential channels for FDI utilisation. From our stocks and capital markets, to property and construction to traditional business and new economy opportunities, Dubai presents several areas where foreign investments can reap rates of returns that are unheard of in other parts of the world," Al Gergawi pointed out.

Al Gergawi said: "The UAE saw a peak in 2002 when most of the major projects had begun to get off the ground. Even though, most projects are getting into their advanced or final stages of completion, the UAE is still seen as the 17th most attractive country in the world to invest in by foreigners. The UNCTAD says that the UAE attracted US $480 million in FDI last year".

He said Arab countries on the top-50 UNCTAD FDI Potential Index are led by Qatar, UAE, Kuwait, Bahrain and Saudi Arabia and also include Jordan and Libya.

Al Gergawi said that the largest amount of FDI received in 2003 was by Morocco, which attracted $2.27 billion, despite the fact that it is ranked 93rd on the UNCTAD FDI Potential Index. Ranked 87th, Yemen was the only Arab country to see a negative FDI inflow of -$89 million.

"The Gulf countries have bucked the worldwide trend which saw FDI inflows falling during 2003," said Al Gergawi, while releasing details of the global report in UAE. He pointed out, however, that global outflows did increase.

Recovery on the way
The outflows increase, together with the improved economic climate, suggests that a recovery is under way in 2004, said Carlos Fortin, Deputy Secretary General of UNCTAD, who released the UNCTAD's World Investment Report 2004: The Shift Towards Services.

In 2003, FDI inflows declined by 18 per cent to $560 billion. This follows a massive fall of 41 per cent in 2001 (from $1.4 trillion in 2000 to $818 billion) and another 17 per cent in 2002 (to $679 billion). The value of cross-border mergers and acquisitions (M&As) - the key driver of global FDI since the late 1980s - was also down 20 per cent last year. The drop in FDI inflows was confined to the developed countries and Central and Eastern Europe. Inflows to developing countries rose by 9 per cent.

Excluding Luxembourg, China was the world's largest host country in 2003 followed by US, Spain, Netherlands, UK, Germany, Singapore, Brazil, Australia and Canada.

Only recently have Arab countries realised the critical importance of FDI to economic growth. UAE was among the first to identify FDI as a key driver of growth and its Dubai Development and Investment Authority was set up to act as the Investment Promotion Agency (IPA). The DDIA is tasked with making intense efforts to promote FDI inflows, and attraction of the latest technology, best practices and expertise into Dubai, the UAE and the wider Arab world. As a Government authority entrusted with catalysing growth and development of the economy, the DDIA also facilitates the growth of leading local businesses and encourages local entrepreneurs.

Part of DDIA's efforts to spread the awareness of FDI in the Arab world, has been the hosting of the International Investment Summit and Exhibition in Dubai in May 2003, which was held to promote the importance of FDI within the region and to draw the attention of FDI movers from the rest of the world. The DDIA has also proposed an umbrella Arab organisation that could act as an Arab Investment Promotion Agency, Al Gergawi said.