Pre-crisis levels of FDI impossible in near future, global investment body says

But UAE defies trend as it managed to change internally, according to World Association of Investment Promotion Agencies

Bostjan Skalar, Waipa CEO, says developed countries should look beyond US-China trade war and bolster global FDI inflows. Courtesy Waipa

At the current rate of development, hitting pre-crisis levels of global foreign direct investment inflows cannot be achieved in the near term, said the chief of the World Association of Investment Promotion Agencies (Waipa).

Global FDI inflows rose in 2007 by 30 per cent to reach almost $1.8 trillion before the economic meltdown that hit world economies in 2008, according to Bostjan Skalar, chief executive of Waipa.

“It [FDI inflow] was predicted to reach $1.7tn in 2017 and $1.8tn in 2018, but we saw an entire opposite graph.”

"Reaching the FDI levels of 2007-08 is not possible in the next two to three years," said Mr Skalar. "Earlier we were aiming to hit the pre-crisis levels in 2018, but we missed the target very badly."

Although, he believes the UAE is bucking the trend.

“The UAE is doing pretty well, because it managed to change internally. When you cannot change the global trends of trade wars or other protectionism measures, you should change yourself,” said Mr Skalar.

Foreign investment into Dubai rose by 26 per cent in the first half of 2018 to $4.84 billion, according to data from the Dubai Investment Development Agency – a unit of the emirate's Department of Economic Development. The rise implies that diversification efforts and support for start-ups are bolstering Dubai's economy.

Waipa was established in 1995 by the United Nations Conference on Trade and Development to stimulate the interests of global investment promotion agencies. It has nearly 160 members spread across 130 countries.

According to the Unctad figures, global FDI flows fell by 23 per cent in 2017 to $1.43tn – a stark contrast to accelerated growth in gross domestic product and trade.

However, there was further slowdown in the first half of 2018 as international FDI inflows plunged by more than 40 per cent.

As foreign investment globally is not set to outdo pre-crisis levels anytime soon, other economies should focus on the UN's 17 Sustainable Development Goals, a blueprint for a better world future adopted in 2015 and intended to be realised by 2030, Mr Skalar said.

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"The top two players in FDI inflows and outflows – US and China – are embroiled in trade war and protectionism issues. Therefore, other parts of the developed world, particularly Europe, should start pushing and look beyond the traditional trade war. [They should] be more consistent with its investment plans and try to keep moving its agenda while not allowing US-China conflicts to impact FDIs", said Mr Skalar.

Optimistic about new UAE laws that will allow certain sectors up to 100 per cent foreign ownership and allocate 10-year visas to investors, Mr Skalar said that foreign companies are bullish about investing in the Emirates.

“More disruption is always good … and currently UAE is successful in what it is doing – especially with opening its economy and changing its investment laws.

“Giving a 10-year visa to a foreign investor is important because investors need stability and peace of mind. They do not want to run from pillar to post for visa renewal every two to three years,” said Mr Skalar.

Political and economic stability is one of the foremost challenges in parts of the Middle East and North Africa when it comes to attracting foreign money.

“Investors do not look at a particular country but they consider the whole region before making investment. We are always trying to support the regional co-operation,” he said.

“Probably, one country will get [capital] this time, the other will get the next time.”