FDI to power UAE’s economy

The UAE has set its sights on doubling foreign direct investment inflows to Dh1.3 trillion ($354 billion) by 2031 under its newly unveiled National Investment Strategy 2031.

The country’s low-risk profile has been instrumental in attracting FDI, with inflows reaching Dh112.6 billion in 2023, a 35 per cent year-on-year surge despite global economic headwinds, according to UNCTAD. The new plan, launched last month, aims to cement the UAE’s status as a global investment hub, leveraging its strategic location, world-class infrastructure, and pro-business policies to drive growth in sectors such as advanced manufacturing, renewable energy, and technology.

His Highness Shaikh Mohammad Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, described the strategy as a continuation of “carefully crafted plans, programmes, and initiatives” aimed at achieving “clear goals” and reinforcing global confidence in the UAE.

The UAE’s ambitious targets are backed by its strong performance in the BMI Operational Risk Index, where it ranks first in the MENA region and 14th globally among 202 markets for its business environment.

The country stands out in key areas critical to attracting investors: it ranks 7th globally for trade and investment risk and 17th for logistics.

“This (ranking) has markedly improved in recent years due to the authorities’ increased efforts to diversify the economy away from oil, which prompted them to introduce numerous economic, business, legal, and labour reforms to enhance the ease of doing business,” says Mariette Kas-Hanna, Senior Analyst, Middle East and North Africa for BMI, a Fitch Solutions Company.

She notes that the national and emirates-level long-term economic visions and their aim to develop and expand key sectors such as tourism, aviation, trade, logistics, technology, and finance create an array of investment opportunities.

“The UAE’s trade profile is supported by quick, simple regulations and minimal customs obstacles, making it a top trading hub. Streamlined electronic clearance and risk assessment systems further enhance efficiency. Despite high border compliance costs, efficient customs and port handling keep overall trade costs competitive,” adds Kas-Hanna.

Dr Nasser Saidi, Founder and President of Nasser Saidi & Associates, an economic advisory and business consultancy firm, states that the country has not only been proactive in attracting new sectors such as fintech, AI, and clean energy but has also continued to draw investments in traditional sectors like transportation, logistics, and industry through its Operation 300bn industrial strategy, as well as oil and gas.

Economic diversification

“In an era of increased global fragmentation, the UAE’s attractiveness as a regional and international trade hub with access to many emerging economies has been increasing,” he says.

Dr Saidi adds that increased FDI flows would further accelerate the UAE’s ongoing economic diversification efforts.

The government’s new investment strategy outlines a roadmap to triple the UAE’s cumulative FDI balance to Dh2.2 trillion, representing 30 per cent of the national investment volume by 2031.

Razan Hilal, market analyst, CMT at Forex.com, a broker and subsidiary of Nasdaq-listed StoneX Group, highlights that this goal, set under the National Investment Strategy 2031 and Dubai’s D33 agenda, is driven by “fostering international relationships, investing in advanced logistics and infrastructure, and diversifying economic sectors with a skilled talent pool”.

The UAE’s strategic location between East and West attracts FDI by offering efficient access to global markets in Asia, Europe, and Africa. “Its advanced infrastructure, including top-tier airports and seaports, supports seamless trade and optimizes supply chains, particularly in key sectors like energy and commodities,” adds Hilal.

Reforms drive momentum

The UAE has strengthened its investment appeal through sweeping reforms. It now allows 100 per cent foreign ownership in most sectors, removing barriers for international businesses.

In 2023, the country overhauled more than 73 federal laws, enhancing intellectual property protections, streamlining dispute resolution, and modernising labor regulations.

“Foreign investment continues to primarily target free zones as they offer more attractive incentives to foreign investors compared to onshore businesses, such as full foreign ownership, tax benefits, a simplified process of establishing a business in these zones, full repatriation of profits, as well as zones specified for each sector,” says Chiedza Madzima, Head of Operational Risk for BMI.

In the first half of 2024, the UAE also exited the Financial Action Task Force’s (FATF) “grey list” after two years, following 18  months of intensified anti-money laundering and counter-terror financing measures.

“In September 2024, the UAE introduced a new anti-money laundering strategy as part of its 2024-2027 National Strategy for anti-money laundering, counter-terrorism, and financial oversight,” says Madzima.

The introduction of long-term residency programmes, such as the Golden Visa, has further cemented the UAE’s reputation as a magnet for global talent and investment.

“By allowing for long-term residence visas and increased ease of doing business, the country has successfully attracted skilled employees and entrepreneurs, especially in new sectors of growth,” says Dr Saidi.

He notes a recent uptick in financial services activity, with both DIFC and ADGM reporting a surge in new clients, particularly in sectors like private equity in Abu Dhabi.

Global ambitions

The new strategy comes as the UAE faces intensified competition for investment amid shifting global economic dynamics. Authorities aim to attract repeat investments, expand existing projects, and secure partnerships with emerging markets through enhanced investor relations and streamlined regulatory frameworks.

Kas-Hanna of BMI expresses confidence that the authorities would maintain their reform momentum in the coming years to attract greater FDI in non-oil sectors, which are prioritised under their long-term visions. “We expect to see more investment in sectors such as manufacturing, trade and logistics, tourism and hospitality, fintech, technology and innovation, renewable energy and sustainability, among others,” she says.

Tech hub

The analyst further highlights that the UAE has positioned itself as a regional tech hub, drawing venture capital and private equity investments into technology start-ups, fintech, and innovation-driven enterprises.

“The technology sector is a key area of focus of the National Investment Strategy announced last month,” she says, adding that the authorities launched the NextGen FDI programme, which aims to accelerate the business set-up process and offer incentives for technology companies looking to relocate to the UAE.

By leveraging its strengths and addressing global investment challenges, the UAE seeks to create a vibrant, investor-driven economy, with the private sector playing a key role in shaping its future.

As global FDI trends shift toward sustainability and technology, the UAE’s strategy places it firmly on the path to not only meet its 2031 goals but to redefine its position as a global leader in innovation and economic resilience. ■