UAE edges up in Kearney's global FDI Confidence Index

US is the top global FDI destination for the 10th consecutive year

The UAE rose one position to 14th place in Kearney's FDI rankings. Victor Besa / The National

The UAE moved a notch up 14th place in the latest foreign direct investment (FDI) rankings despite lingering pandemic uncertainties and headwinds posed by the global geopolitical situation.

Qatar is the only other country in the Middle East to join the UAE this year on the Foreign Direct Investment Confidence Index compiled by consulting company Kearney.

The UAE had been “the region’s lone market on our index for the past two years”, said Paul Laudicina, chairman emeritus of Kearney and founder of the Global Business Policy Council, who co-authored the report with Erik Peterson, managing director of the council.

“Qatar likely benefited from investor enthusiasm about the country hosting the 2022 Fifa World Cup, the first Arab country ever to do so.”

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GCC economies have bounced back strongly from the pandemic-induced slowdown as economic momentum continues to gather pace amid regional governments’ diversification push.

The UAE was among the top 20 economies globally last year that attracted foreign investment as inflows to the country rose 3.9 per cent annually in 2021 to nearly Dh76 billion ($20.7bn). That led the total FDI balance in the country to rise 13.7 per cent over 2020 to about Dh630bn at the end of 2021, the Ministry of Economy said on Wednesday.

The UAE, the Arab world’s second-largest economy, aims to attract Dh550bn in foreign investment to the country by 2030, to eventually reach Dh1 trillion by 2051.

The government is pushing to increase FDI at a time when the global investment landscape is changing rapidly, thanks to post-pandemic trends, evolving economic priorities and a sharp rise in digitalisation.

Other emerging economies that featured in the Kearney index, which ranks 25 countries likely to attract the most investment in the next three years, include China in 10th place and Brazil in 22nd position.

China’s move up two positions in the latest ranking is perhaps “a reflection of the country’s strong economic recovery in 2021 and continued solid growth projections over the next three years”, Kearney said.

The US, the world’s biggest economy, retained its position as the top global FDI destination for the 10th year in a row.

“This result likely reflects tailwinds following the country’s economic rebound to 5.8 per cent growth in 2021 (following a 3.4 per cent contraction the year prior) as well as optimism about the country’s $1.2 trillion infrastructure bill, which was passed in November 2021,” the co-authors said.

Germany, Canada, Japan, the UK, France, Italy, Spain and Switzerland make up the rest of the top 10 global FDI destinations, according to the index.

“In an environment marred by two years of pandemic disruption, this year’s survey once again demonstrated investors’ preference for trusted and developed markets in times of uncertainty,” the report said.

“This is reflected in the relative consistency of the make-up of our list from last year to this year.”

Global chief executives and investors, who were surveyed before Russia’s military offensive in Ukraine, were optimistic about economic growth prospects on the back of improving outlook and a belief that most countries in the index would see their three-year economic prospects improve.

The resurgence of FDI last year after the pandemic, which crimped investment flow by more than 35 per cent in 2020, also drove optimism in the beginning of the year.

Globally, FDI flows increased 77 per cent to about $1.65tn last year, up from just $929bn in 2020. This number surpassed pre-pandemic investment levels, which stood at about $1.5tn, according to the the UN Conference on Trade and Development's Investment Trends Monitor.

However, even before the Ukraine conflict, investors did identify commodity prices, geopolitical tensions and persistent inflation as areas of concern in 2022.

“Just a few months into the year, each of these concerns has already developed, exacerbated, of course, by Russia’s military actions in Ukraine,” the co-authors said.

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The largest share of investors surveyed by Kearney intend to maintain their level of FDI or seek additional investments in developed markets rather than in emerging or frontier markets, with governance and regulations among the key considerations.

About 70 per cent of investors are interested in developed markets and are either maintaining or seeking to expand investment opportunities in them, relative to 59 per cent in emerging and 57 per cent in frontier markets.

The intention to seek new investment opportunities was strongest in the Americas (42 per cent), followed by the Asia Pacific (30 per cent), and Europe (21 per cent).