Covid-19's impact on the international economy has been as bad as some of history's worst recessions. The IMF estimates that global markets shrunk by almost 4.5 per cent in 2020, the steepest decline since the Great Depression. And like in the 1930s, today's decline hurts not just people's savings, but their ability to retain employment. The International Labour Organisation estimates that a severe drop in the number of global working hours was equal to the loss of more than 250 million full-time jobs worldwide, four times as many as in the 2009 financial crisis.
More bad news came yesterday when the UN Conference on Trade and Development released data on 2020's foreign direct investment (FDI) flows, an important metric for measuring the competitiveness of a country's business environment. Last year, they plunged by 35 per cent globally.
The Gulf, however, has come out far better than most regions. Saudi Arabia saw an increase of around 20 per cent, bringing FDI's value in the country to $5.5 billion. The total value in the UAE is even higher at almost $20bn after an increase last year of 11 per cent. This makes the UAE the 15th-biggest recipient of FDI globally.
While global levels have been decreasing since 2017 when the Trump administration started to encourage American multinationals to repatriate their earnings, Covid-19 has turned what had been a decline into a full-blown slump, particularly in developed economies. The UK, for example, saw its levels fall by almost 57 per cent last year.
The UAE has bucked the trend for a few key reasons. The country is reaping the rewards of boosting foreign investment in its non-core energy assets. A key example last year was a consortium of the world’s leading infrastructure and sovereign wealth funds signing an agreement to invest in Abu Dhabi’s natural gas pipelines assets, worth $10bn in FDI. In 2019, a similar deal involved Adnoc's oil pipelines, generating $5bn.
These steps were part of a wider attempt to give foreign investors more access to the country's markets. Since the beginning of this month, new laws permit full foreign ownership of onshore companies. Next year's FDI rates will likely see a boost as a result of this historic reform. The government is taking a particular interest in attracting global start-ups. Projects such as Hub 71 continue to pull in promising firms from around the world, giving them huge incentives to base their operations in Abu Dhabi.
Earlier this month The National wrote about the UAE climbing the rankings in the IMD World Competitiveness Centre's World Talent Ranking, which measures the success leading economies have in training and attracting gifted professionals from around the world. Yesterday's data shows that it is not just foreign specialists coming into the country, but foreign money, too.
Paying for the post-pandemic recovery will be a great deal easier for the few economies that have managed to stay relatively stable throughout the past year and a half. Pockets of resilience in the Middle East offer at least some economic good news for the region at a time when it needs it most.