United Arab Emirates FDI Outlook

Abstract

FDI is important in building a sustainable and diversified knowledge-based UAE economy. The stock of FDI grew at an average annual growth rate of 45.3 percent over the past decade reaching US$ 95 billion or nearly 27 percent of GDP in 2012. FDI flows have not recovered from the global financial crises. Most FDI stock is concentrated in finance, construction, and real estate. Recent greenfield FDI is concentrated in construction, while more than half of top M&A deals took place in finance, transportation, communications and utilities. The list of top OECD home countries for FDI flows to the UAE include Italy, Germany, Chile, United Kingdom, Luxembourg, France, United States, and Belgium. Though UAE investment policy limits foreign investment and reduces competition, the Government has undertaken reforms and contracted investment treaties that have encouraged investment. Efforts are under way to speed up the ratification of a new foreign investment law, which removes several of the current legal barriers to FDI and offers foreign investors similar rights to those of UAE nationals. The UAE has high FDI potential with plenty of room for improving FDI performance and benefiting the economy.

Keywords: FDI, outlook, UAE

JEL Classification: F21, F23