A three-year awaited development: FDI's in GCC no longer declining!
Foreign direct investment (FDI) in the GCC in 2012 increased slightly over the previous year to reach $26.4 billion, according to data published by UNCTAD in their annual World Investment Report 2013.
This brings to an end three consecutive years of declining FDI flows to the region since the pre-financial crisis peak of $61.7 billion in 2008, said NBK in an economic update.
“The GCC’s positive performance is further accentuated when placed in the context of developing economy and world FDI flows, both of which declined in 2012, by 4.4 per cent and 18.2 per cent, respectively,” it said. “The GCC increased its share of developing economy FDI to 3.8 per cent from 3.6 per cent.
“While global FDI flows—especially those originating from developed economies—remain inhibited by the deleveraging of international banks and investors’ heightened sensitivity to risk, the GCC, as a destination for foreign investment, has benefited from a combination of relatively high hydrocarbon prices, buoyant economic growth and an ambitious program of government-sponsored investment projects. The region also regularly accounts for more than 50 per cent of all FDI to the Arab Middle East and North Africa.
“Within the GCC, in 2012 FDI flows to all the countries with the notable exception of Saudi Arabia increased over the previous year. The latter, by virtue of its size, was rather more susceptible to the difficulties experienced by investors in accessing capital from retrenching international banks and witnessed a 25 per cent decline in FDI to $12.2 billion. The Kingdom remains the most attractive destination for foreign investment in the Arab world, however.
“In the UAE and Kuwait, FDI inflows increased in 2012 to $9.6 billion and $1.9 billion, respectively. The 25 per cent increase in FDI to the UAE over the previous year was further evidence of the recovery in investors’ appetites after the Dubai World debt crisis. In Kuwait, the doubling of FDI was primarily the result of Qatar Telecom’s acquisition of additional shares in the mobile operator Wataniya.
“GCC FDI flows have also been facilitated by the significant improvements made by individual countries in the ease of doing business. Saudi Arabia and the UAE, for instance, ranked 22 and 26 in the world, respectively, have made positive strides in reformingthe procedures, costs and time taken to start a business, trade across borders and deal with construction permits, for example.
“Meanwhile, FDI flows from the GCC to other countries declined last year, by 17.7 per cent to $18.6 billion.(Chart 4.)Kuwait was once again the largest investor overseas, accounting for 41 per cent of GCC outflows with $7.6 billion, followed by Saudi Arabia with $4.4 billion and the UAE with $2.5 billion.”