Foreign direct investment (FDI) in the GCC fell to $24 billion last year from $28 billion in the previous year, down 14.6 per cent, according to United Nations Conference on Trade and Development’s (UNCTAD) annually published World Investment Report 2014.

The world FDI, however, increased 9.1 per cent from its level in 2012 to reach %1.5 trillion last year, it said.

A part of the decline in FDI to the GCC is on the back of the completion of major projects as well as the social tensions and political uncertainty that have affected the broader Middle East, said the report.

The GCC, with its ample hydrocarbon resources has, nevertheless, been buffered by the regional unrest, and so the reduction in FDI is likely more a reflection of the tailing-off in investments following the completion of major hydrocarbon projects and the reduction of foreign exposure to certain sectors within GCC economies, it said.

Meanwhile, the UAE led the GCC in FDI for the first time last year, with $10.5 billion, pushing Saudi Arabia into second place.

Along with Bahrain, the UAE is the only country to record four consecutive years of increasing FDI inflows, as investors returned to the property, manufacturing and services sectors and as the country gears up for the Dubai World Expo in 2020.

Saudi Arabia, which is historically the region’s largest recipient of foreign investment, has, however, experienced five consecutive years of declining FDI flows.

The FDI decreased by 24 per cent from $12.2 billion in 2012 to $9.3 billion last year. This was despite significant investment in capital projects including infrastructure, oil refining and petrochemicals.

The FDI flows to Kuwait were also estimated to have decreased last year to $2.3 billion. However, the country has experienced a resurgence in FDI as a string of acquisitions by mainly GCC based-entities helped to boost investment.

The government, for its part, last year unveiled an update to its FDI law of 2001 in order to streamline the FDI approvals process and expand the list of eligible investments. A fully resourced and independent public authority (KDIPA) for the promotion of FDI has been set up to replace the previous FDI office and approvals committee.

The unit will have full control over its own budget and hiring and be able to assess and approve FDI applications more quickly through the creation of a ‘one stop shop.’

Kuwait emerged once again as the GCC and the Arab world’s largest overseas investor, with $8.4 billion in FDI outflows. The country almost tripled its investments on the year before, said the report.

Qatar and Saudi Arabia were the second and third largest overseas investors, respectively, with $8 billion and $5 billion in FDI outflows. Qatar more than quadrupled its outflows, it said.

The aggregate GCC outflows increased by 93 per cent from the year before to reach $26.7 billion as the member states continued to direct their burgeoning foreign exchange reserves into overseas projects and acquisitions. - TradeArabia News Service