The UAE jumped four spots to 15th place in the latest Foreign Direct Investment Confidence Index report by consulting firm Kearney.
Other emerging economies that feature in the report, which ranks 25 countries that are likely to attract the most investment in the next three years, include China in 12th position and Brazil at 24th.
The US retained its top position, followed by Canada and Germany. The UK, Japan, France, Italy and Australia also feature in the top FDI rankings.
The UAE’s “striking rise in the rankings this year is likely a result of its advanced technological infrastructure and high innovation levels, as well as its efficient response to the pandemic,” the Kearney report said.
Along with Bahrain, the UAE became the first country to approve a Covid-19 vaccine in December, and the country plans to vaccinate the entire population by the end of 2021.
As of Thursday, UAE had administered 7.6 million doses, covering 35.4 per cent of the total population, according to Bloomberg's vaccine tracker.
“Behind Israel and Seychelles, the UAE has vaccinated the highest portion of its population, which should boost economic and investment prospects further,” the report said.
The UAE is also undertaking various measures to attract more FDI into the country. Earlier this week, the country unveiled a new industrial strategy to boost the contribution of the industrial sector to Dh300 billion in the next 10 years from Dh133bn currently.
The Arab world's second-biggest economy also overhauled its commercial companies' law last year to attract more foreign capital and annulled the requirement for onshore companies to have an Emirati shareholder.
However, the FDI Confidence Index reveals a significant fall in overall optimism about the global economy in the wake of the coronavirus pandemic.
“This year’s rankings point to continued apprehension and uncertainty about how quickly the global economy will recover post-Covid,” the report said.
“In addition to the fall in confidence about the economy, most of the overall scores for the top 25 countries have fallen compared with previous years. Only 57 per cent of investors are optimistic about the three-year global economic outlook, which is much lower than the corresponding figure last year of 72 per cent [prior to and at the onset of the pandemic].”
The Covid-19 pandemic, which upended global trade and disrupted the travel and tourism sector, tipped the world’s economy into its deepest recession since the 1930s. Global output is set to expand 5.5 per cent in 2021 after contracting 3.5 per cent last year, according to the International Monetary Fund’s projections.
Global FDI slumped 42 per cent in 2020 and is expected to weaken further this year as the pandemic continues to affect the pace of economic recovery, according to the United Nations Conference on Trade and Development.
Foreign investment flows plunged to $859bn at the end of December, down from $1.5 trillion in 2019, Unctad said in January.
The report's findings show that developed economies account for the lion’s share of the top 25 rankings as “established markets represent more safety and stability to business leaders whose strategies and bottom lines have been shaken by the pandemic”, Erik Peterson, managing director of Kearney's global business policy council and co-author of the study said.
In addition, investors “continue to prioritise destinations with strong infrastructure, strong governance, investment in technology and innovation, and macroeconomic stability, natural strengths of most developed markets,” he said.
China, the world’s second-largest economy, dropped four positions to 12th place, largely due to concerns over US trade tensions impacting its growth.
“Overcoming Covid-19 will be key to global economic recovery and the improvement in FDI flows as the two go hand in hand,” Mr Peterson, said. “And economic growth in the near term will be determined in large part by the duration of the global pandemic, the effectiveness of fiscal and monetary responses, and the success of vaccination efforts.”