Foreign direct investment (FDI) inflows increased in all three major economic groups -developed, developing and transition economies – although at different growth rates. FDI flows to developing economies reached a new high of $778 billion, accounting for 54 percent of global inflows in 2013. Flows to most developing subregions were up. Developing Asia remained the largest host region in the world. FDI flows to transition economies recorded a 28 percent increase, to $108 billion. But FDI flows to Kuwait are estimated to have decreased by 41 percent in 2013. 
FDI flows to developed countries increased by 9 percent to $566 billion – still only 60 percent of their pre-crisis average during 2005-2007. FDI flows to the structurally weak, vulnerable and small economies fell by 3 percent in 2013, from $58 billion in 2012 to $57 billion, as the growth of FDI to least developed countries (LDCs) was not enough to offset the decrease of FDI to small island developing States (SIDS) and landlocked developing countries (LLDCs). Their share in the world total also fell, from 4.4 percent in 2012 to 3.9 percent.
Outward FDI from developed economies stagnated at $857 billion in 2013, accounting for a record low share of 61 percent in global outflows. In contrast, flows from developing economies remained resilient, rising by 3 percent to reach a new high of $454 billion. Flows from developing Asia and Africa rose while those from Latin America and the Caribbean declined. Developing Asia remained a large source of FDI, accounting for more than one fifth of the global total. And flows from transition economies rose significantly – by 84 percent – reaching a new high of $99 billion.
Turkey remained West Asia’s main FDI recipient in 2013, although flows decreased slightly, remaining at almost the same level as in the previous year – close to $13 billion (figure A). This occurred against a background of low crossborder M&A sales, which dropped by 68 percent to $867 million, their lowest level since 2004. While inflows to the manufacturing sector more than halved, dropping to $2 billion and accounting for only 16 percent of the total, they increased in electricity, gas and water supply (176 percent to $2.6 billion), finance (79 percent to $3.7 billion), and real estate (16 percent to $3 billion).
Together these three industries represented almost three quarters of total FDI to the country. FDI flows to the United Arab Emirates continued their recovery after the sharp decline registered in 2009, increasing in 2013 for the fourth consecutive year and positioning this country as the second largest recipient of FDI after Turkey. Flows increased by 9 percent to $10.5 billion, remaining however well below their level in 2007 ($14.2 billion). This FDI recovery coincided with the economy rebounding from the 2009 debt crisis, driven by both oil and non-oil activities. Among the latter, the manufacturing sector expanded, led by heavy industries such as aluminium and petrochemicals; tourism and transport benefited from the addition of more routes and capacity by two local airlines; and the property market recovered, thanks to the willingness of banks to resume loans to real estate projects, which brought new life to the construction business, the industry that suffered most from the financial crisis and has taken the longest to recover. That industry got further impetus in Nov 2013, when Dubai gained the right to host the World Expo 2020.
New highs Flows to Saudi Arabia registered their fifth consecutive year of decline, decreasing by 24 percent to $9.3 billion, and moving the country from the second to the third largest host economy in the region. This decline has taken place despite the large capital projects under way in infrastructure and in downstream oil and gas, mainly refineries and petrochemicals. However, the government remains the largest investor in strategically important sectors, and the activities of many private firms (including foreign ones) depend on government contracts (non-equity mode) or on joint ventures with State-owned companies.
The departure in 2013 of over 1 million expatriate workers has exacerbated the mismatch of demand and supply in the private job market that has challenged private businesses since the 2011 launch of the policy of “Saudization”. Flows to Iraq reached new highs. Despite high levels of instability in Iraq, affecting mainly the central area around Baghdad, FDI flows are estimated to have increased by about 20 percent in 2013, to $2.9 billion.
The country’s economic resurgence has been underpinned by its vast hydrocarbon wealth . Economic growth has been aided by substantial increases in government spending to compensate for decades of war, sanctions and underinvestment in infrastructure and basic services. In addition, work on several large oilfields has gathered speed since the award of the largest fields to foreign oil TNCs. A significant development for the industry in 2013 was the start of operations of the first stage of a long-delayed gas-capture project run by Basra Gas Company (State-owned South Gas Company (51 percent), Shell (44 percent) and Mitsubishi (5 percent)).
The project captures associated gas that was being flared from three oil fields in southern Iraq and processes it for liquefied petroleum gas (LPG), natural gas liquids and condensate for domestic markets. FDI flows to Kuwait are estimated to have decreased by 41 percent in 2013, after having reached record highs in 2012 owing to a one-off acquisition deal worth $1.8 billion. FDI to Jordan increased by 20 percent to $1.8 billion, despite regional unrest and sluggish economic growth.