UAE ranks second globally for greenfield FDI in 2023

Global investment flows rose by 3 per cent last year to about $1.37 trillion

The UAE aims to attract $150 billion in foreign investment by 2031. Khushnum Bhandari / The National

The UAE ranked second after the US for greenfield foreign direct investment last year, as project announcements in the Emirates rose by 28 per cent, bolstering its position as a worldwide FDI hub despite global economic uncertainties, a UN report has said.

Greenfield FDI flows into Saudi Arabia, the Arab world's biggest economy, also jumped by 63 per cent last year, according to the report by the UN Conference on Trade and Development, released on Wednesday.

“In West Asia, FDI remained stable (up 2 per cent) due to continued buoyant investment in the [UAE],” the Global Investment Trends Monitor report said.

The UAE has set an ambitious target to attract Dh550 billion ($150 billion) in foreign investment by 2031 and rank among the top 10 countries globally in terms of attracting FDI, as part of its economic diversification strategy.

It has unveiled several initiatives and policies, from allowing 100 per cent foreign ownership of companies to more flexible visa programmes, aiming to attract capital and talent to the country.

In July 2022, the UAE also unveiled the NextGen FDI programme, which seeks to speed up licensing, increase the issuance of bulk or golden visas, improve banking services and provide commercial and residential lease incentives for advanced technology companies seeking to relocate to the country.

The country's comprehensive economic partnership agreements are also aimed at enhancing bilateral investments.

The UAE has signed Cepas with India, Cambodia, Georgia, Israel, Indonesia and Turkey, and plans to sign 26 deals in total, officials say.

Globally, FDI flows stood at about $1.37 trillion last year, up 3 per cent annually, “defying expectations as recession fears early in the year receded and financial markets performed well”, Unctad said.

“However, economic uncertainty and higher interest rates did affect global investment.”

The headline increase in global FDI flows was due “largely to higher values in a few European conduit economies; excluding these conduits, global FDI flows were 18 per cent lower”, the report said.

The US was the largest FDI recipient last year, although inflows dropped by 3 per cent last year, greenfield project numbers by 2 per cent and project finance deals by 5 per cent.

FDI in the EU jumped from a contraction of $150 billion in 2022 to growth of $141 billion amid large swings in Luxembourg and the Netherlands. Excluding those two countries, inflows to the bloc were down 23 per cent.

Investment flows to developing countries also fell by 9 per cent to $841 billion last year, with declining or stagnating flows in most regions, Unctad said.

China saw a “rare decline” of 6 per cent in FDI inflows last year, although new greenfield project announcements grew by 8 per cent.

India reported a 47 per cent drop in FDI inflows, but new project announcements were stable, helping it to remain within the top five global greenfield project destinations, Unctad said.

International investment project announcements were mostly in negative territory last year.

International project finance and cross-border mergers and acquisitions suffered the most from higher financing costs in 2023, with 21 per cent and 16 per cent fewer deals respectively.

Greenfield project announcements were also down 6 per cent, although they were 6 per cent up in value and “showed higher numbers in manufacturing in an initial sign of recovery following a long-term declining trend”, Unctad said.

Looking ahead, the Unctad report said “a modest increase in FDI flows in 2024 appears possible, as projections for inflation and borrowing costs in major markets indicate a stabilisation of financing conditions for international investment deals”.

“However, significant risks persist, including geopolitical risks, high debt levels accumulated in many countries, and concerns about further global economic fracturing.”