Why UAE is the top destination for foreign direct investment
The UAE ranked among the top 25 countries to attract foreign direct investment (FDI) in A.T. Kearney FDI Confidence Index.
FDI inflows to the Arab country, which came at 21st place , have remained steady in recent years, reaching $11 billion in 2014 and 2015, and greenfield investments nearly tripled to 129 announced projects in that period.
The International Monetary Fund (IMF) forecasts Emirati economic growth will strengthen to 2.5 per cent this year and 3.1 per cent in 2018.
The stronger forecast growth is in part a function of the reforms pursued by the government to spur foreign investment and diversify the economy away from oil. Investor-oriented reforms include instituting updated bankruptcy and investment laws, simplifying the process for obtaining construction permits, reducing the time required to obtain an electricity connection, and introducing compensation for power outages.
The UAE has also pledged to continue to advance its technological readiness and deepen its commitment to innovation. The government’s recent efforts show signs of gaining significant traction.
In the World Bank’s Doing Business 2017, the UAE is highlighted as one of the top 10 economies that made the greatest improvements in business relations.
Rudolph Lohmeyer, Vice President of A.T. Kearney’s Global Business Policy Council said, “Investors clearly consider the UAE to be one of the strongest, most diversified economies in the region and value its position as a regional and global gateway. The UAE’s ranking this year is a function of many factors, including excellence in governance, demonstrated resilience, world-class infrastructure and a deep, unwavering commitment to innovation.”
Three-fourths of companies plan to increase their foreign direct investment in the next three years, according to the index from global strategy and management consulting firm A.T. Kearney.
This is an increase from last year’s results, despite expectations that geopolitical events and rising anti-globalization could have put a damper on FDI worldwide.
This year’s edition of the Index, entitled Glass Half Full, finds that while global business executives are increasingly concerned about the negative effects of politics and geopolitics, they are nevertheless more bullish on the global economy and FDI prospects.
For the third year in a row, global business executives see an increase in geopolitical tensions as the greatest risk in the external environment.
Investors’ concerns about geopolitics and rising protectionism are in fact likely driving some of their motivation to increase FDI.
In an environment of slowing global trade growth and increasing barriers to trade, FDI may offer a localization strategy for investors in key markets.
“Investors told us that they are optimistic about the future of the global economy, global uncertainties notwithstanding, and see many quality opportunities for FDI worldwide,” says Paul A. Laudicina, founder of the FDI Confidence Index and chairman of A.T. Kearney’s Global Business Policy Council.
“For the first time since the global financial crisis, we saw a rise in the number of emerging markets on the Index. This could be an inflection point after years of increasing dominance by developed markets on the FDI Confidence Index.”
The United States again tops the FDI Confidence Index, holding its first-place position for the fifth year in a row.
Investors are also more bullish on the US economic outlook than any other economy on the Index.
Germany rises to the second position in the FDI Confidence Index, followed by China in third place. The United Kingdom and Canada round out the top five spots.