Foreign direct investment into the UAE is picking up pace but remains short of its pre-crisis peak.
The UAE received US$6.2 billion in greenfield foreign direct investment (FDI) last year as overall foreign investment flows into the country increased for the fourth consecutive year, according to a report by FDI Intelligence, owned by The Financial Times.
Greenfield FDI differs from foreign direct investment proper, in that it is a measure of new capital, plant and infrastructure projects built by foreign companies in a region.
It does not include investments to repurpose existing capital, plant or infrastructure, also called brownfield investment. This means that it is arguably a better measure of investment that should boost an economy’s spare capacity and create new jobs.
The United Nations Conference on Trade and Development (UNCTAD) valued overall FDI into the UAE, including greenfield and brownfield investment, at $10.5bn, still significantly below its 2007 peak of $14.2bn.
The UAE is the second-largest recipient of FDI spending in the Middle East behind Turkey, and the fourth-largest recipient of greenfield investment spending.
UNCTAD pointed to broad economic recovery in both oil and non-oil sectors as the reason for increased FDI, with manufacturing and construction rebounding especially well after post-crisis lows.
Greenfield FDI into the Middle East totalled $44bn last year, and was expected to increase over the next three years.
FDI increases into the Middle East would be led by “the recovery of the Middle East from the collapse in construction investment during the global financial crisis”, said FDI Intelligence.
The UAE remained the Middle East’s largest greenfield investor in other foreign countries, and was the world’s 11th largest source of foreign investment – just behind Brazil and Korea.
The UAE invested $14.68bn in greenfield projects in other countries, about 30 per cent of all FDI outflows from the Middle East.
These investments have largely been made by a mixture of state-backed companies and sovereign wealth funds. Emaar and Etisalat made multibillion-dollar investments in Egypt and Nigeria respectively, while the Abu Dhabi Investment Authority managed about $770bn in assets, according to the Sovereign Wealth Fund Institute.
The report predicted that FDI outflows from Middle East countries including the UAE would likely increase, given their large reserves of foreign currency and large surpluses in their balance of payments.
abouyamourn@thenational.ae
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