Dubai:
The UAE continues to move up the ranks in the world’s top destinations for foreign direct investment, thanks to its well-developed infrastructure, strategic location and tax-free environment, a new report showed.
According to the latest A.T. Kearney Global Foreign Direct Investment Confidence Index (FDICI), the UAE has moved up one place to rank the 14th most attractive FDI destination globally, ahead of Switzerland, South Africa or Spain.
Occupying the number one spot is the United States, followed by China, Brazil, Canada and India.
Conducted regularly over the last 15 years, the index serves as a gauge of sentiment among senior executives at the biggest organisations in the world.
A. T. Kearney’s report noted that inflows to the UAE went up by 40 per cent in 2011 to reach $7.7 billion. FDI flows to the country have the potential to expand further as the UAE eases up on foreign ownership regulations. The country is anticipated to pass a new law that will allow foreigners to own more than 49 per cent of businesses outside the free zones.
“With strengths in logistics, tourism and hospitality, the UAE remains the pocket of strength for regional investments in the Middle East. FDI could increase in coming years as the UAE eases foreign ownership laws,” said Anshu Vats, partner at A.T. Kearney Middle East.
Analysts have said that the Middle East region, not just the UAE, has a number of positive qualities that investors look for in a destination, such as strong demographics and solid fundamentals, A report by Ernst & Young earlier noted that despite the Arab Spring, the number of FDI projects in the Middle East increased by 7.8 per cent in 2011.
“The region’s large population is one of the youngest and wealthiest in the world. Vast natural resources combined with increasing oil prices have created substantial budget surpluses among oil exporters, which has helped Middle Eastern governments increase their spending on infrastructure projects and efficiently drive their diversification efforts,” said Abdul Aziz Al Sowailim, chairman and CEO of Ernst & Young Middle East and Africa, in a report.
Overall, the majority of corporate investors surveyed by A.T. Kearney (70 per cent) expect near-term recovery of their companies’ FDI levels. About half of them see their budgets already returning to pre-crisis levels and 20 per cent expect a return by 2014.
“If this were to happen, the FDI swell could provide a knock-on effect to global growth as macroeconomic clouds clear away,” the report said.
However, about a third of the respondents are taking a “wait and see” approach to FDI. “While investors are still in a holding pattern as they have been since the recession, they seem more optimistic and less jittery than they have in recent years,” said Paul Laudicina, chairman emeritus at A.T. Kearney.
