Foreign direct investment (FDI) in Bahrain bounced back strongly last year to $781 million after a period of serious decline in the wake of the global financial crisis, according to the latest World Investment Report.

After attracting investment of $1.8 billion in 2008, the inflow slumped to just $257 million in 2009 and was much the same the following year, said the report launched yesterday (July 5) by the United Nations Conference on Trade and Development (UNCTAD).

UNCTAD chief of investment and enterprise Paul Wessendorp told at a conference at the Sheraton Hotel that while FDI had decreased as a whole last year to West Asia, it had seen an upturn in the first five months of the year.

But he predicted this would flatten out later in the year.

'High corporate profit at leading international companies which freed up funds for overseas investment was the main reason for the recovery but given the financial problems in the West we are likely to see corporates paying out cash in dividends and writing down debt as the year progresses,' he said.

But he said there were still good signals for FDI for countries like China and India because of a lack of opportunities in Europe.

FDI to West Asia decreased by 16per cent in 2011 to $49 billion, affected by political instability and the general deterioration of global economic prospects during the second half of the year.

A 35 per cent drop in FDI inflows to the GCC countries largely explains the decrease, in particular a 42per cent fall to $16 billion to Saudi Arabia.
'GCC countries are still suffering from the hangover of the days of leveraged financing characterised by large-scale domestic projects, some of which had to be put on hold or cancelled due to uncertainties stemming from the global financial crisis and unrest in the region,' the report adds.

'FDI outflows from West Asia rebounded by 54 per cent in 2011 after bottoming out at a five-year low in 2010.

'The strong rise in oil prices beginning at the end of 2010 increased the availability of funds for outward FDI from GCC countries.'

Globally, FDI inflows rose 16 per cent in 2011, surpassing the 2005-2007 pre-crisis level for the first time, despite the continuing effects of the global financial and economic crisis and the current debt crisis in Europe, the report adds.

'A resurgence of economic uncertainty and the possibility of lower growth rates in major emerging markets risk are undercutting FDI in 2012.'

UNCTAD says the FDI growth rate will slow in 2012, with flows levelling off at around $1.6 trillion. The report was launched at leading financial centres across the world, with Bahrain chosen as the venue for the West Asia region. – TradeArabia News Service