At a time when the United Nations Conference on Trade and Development (UNCTAD) anticipated a positive 2022 for global foreign direct investment (FDI), an investors’ guide identified four Arab countries that investors should monitor this year: the Kingdom of Saudi Arabia, United Arab Emirates, Qatar, and Sultanate of Oman.
According to UNCTAD‘s Investment Trends Monitor, global FDI flows showed a strong recovery, up 77 percent to $1.65 trillion in 2021, from $929 billion in 2020.
This significant increase was driven by higher infrastructure financing, due to economic stimulus packages.
In fact, foreign direct investment is considered one of the most preferred types of investment, as it provides the resources necessary to implement investment programs targeted by the countries’ economic development plans.
Moreover, the Coronavirus pandemic has had a devastating effect on economies worldwide, disrupting supply chains and production networks, and restricting the flow of goods, services, capital, and movement, which severely affected trade and business in the Arab region in 2020.
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An Investor’s Guide to the Middle East
“Four Arab Countries Investors Should Watch in 2022” is the highlight of the Middle East Investment Monitor, which identifies countries that look set for stellar years in 2022 for FDI.
According to the report, the following countries were on the list:
Saudi
- Saudi Arabia, which is focusing on empowering the private sector, expects economic growth of 7.4 percent in 2022. It is seeking to become a tech hub. In August 2021, the Kingdom launched a series of technology initiatives worth more than $1.2 billion.
With its aim to attract investors in the technology field, the Gulf state is progressing with its plans to create an artificial intelligence-powered $500 billion city, “NEOM”. The first phase is scheduled to open in 2025, with plans to extend the city into Egypt and Jordan, becoming the first private zone to span three countries.
UAE
- The United Arab Emirates (UAE) has launched the Projects of the 50, a series of developmental and economic projects aimed at accelerating the country’s development and transforming it into a comprehensive hub in all sectors and consolidating its position as an ideal destination for talents and investors.
The UAE forecasts a 4.2 percent economic growth in 2022.
As part of its plans to achieve economic growth goals, the UAE aims to attract $150 billion in foreign direct investment by 2030.
To remain attractive to investors, the UAE announced that all government entities would adopt a new working week schedule. This pragmatic approach to attracting global investment and talent, along with incentives and reforms, makes the UAE a country worth watching in investment plans.
Qatar
- Qatar, which will host the FIFA World Cup 2022 in November and December, brings with it a lot of opportunities. The country expects that hosting the FIFA World Cup would create more than 1.5 million new jobs in key sectors such as construction, real estate, and hospitality.
Oman
- Oman’s economy is expected to grow by 3.3 percent in 2022, according to a report by the International Institute of Finance.
The increased demand for oil will benefit the country in 2022. Additionally, the new five-year plan for the period 2021-2025, as part of the “Oman Vision 2040”, has also provided a more realistic outlook of the short term.
The share of the Gulf countries towards direct investment
According to data by Dubai Investment Development Agency and reported by the Dubai Foreign Direct Investment Monitor between January and September 2021, statistics ranked Dubai first in the Arab world and third globally in terms of attracting foreign direct investment, with projects reaching a cumulative value of $4.35 billion,
High and medium technology investments accounted for 64 percent of the inbound FDI capital.
While job creation due to total foreign direct investment jumped by 36 percent on an annual basis to 16,430 new jobs.
The United Kingdom, France, the United States, Saudi Arabia, and India were among the top foreign direct investment source countries, accounting for 72 percent of the total capital inflow in Dubai.
The Crown Prince of Dubai and Chairman of the Executive Council, Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, affirmed that “the positive results of the growth of investments during the first nine months of 2021, despite the economic and health challenges that the world is going through, come to enhance the emirate’s position globally as a preferred destination for investment and work, life and visit.”
ESCWA: GCC countries have moved ahead with their legislative frameworks
The United Nations Economic and Social Commission for Western Asia (ESCWA) commended the progress made by the countries of the Gulf Cooperation Council in the past two years, in terms of establishing and developing legislation for foreign direct investment.
Its data issued in the report “Arab Business Environment Legislative Frameworks” show that the necessary regulatory frameworks for investment in the Gulf Cooperation Council (GCC) countries have become “very developed”. It added that banking regulations, necessary elements in attracting foreign investment, have become “very strong.”
In addition, the ESCWA said that the GCC countries score very high, and their regulations are largely compliant with international standards.
Furthermore, Arab countries in general also have adopted macroeconomic policies, aimed at attracting foreign direct investment, and have plans to stimulate foreign direct investment, such as an institution or authority regulating such investment in the banking sector, tax exemptions, or free zones.
In arranging specific enforcement mechanisms in FDI legislation, the Gulf Cooperation Council countries ranked as “strong” in general. The Kingdom of Saudi Arabia, the United Arab Emirates, and Qatar ranked all three under this category, while Kuwait and Oman ranked as “very strong.”
On the other hand, Bahrain ranked as “weak”.
Next steps
In spite of this generally positive overview, the capital and liquidity regulatory constraints within the banking sector, imposed by many Arab countries in order to achieve banking system stability and reduce capital flight, could potentially harm the process of attracting foreign direct investment.
Finally, countries should be aware that there is a big difference between the law and the implementation thereof. As a matter of fact, it is not enough to encourage investment of whatever kind, but authorities need to issue and enforce decrees for it to become effective.
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