UAE sees foreign investments rise to $9.6bn

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The UAE's attractiveness as a country to invest in is improving despite the Middle East region seeing a drop in foreign direct investment (FDI), AT Kearney has said in a new report.

The UAE moved up one place to claim 14th position in the latest AT Kearney Global Foreign Direct Investment Confidence Index (FDICI).

"With strengths in logistics, tourism, and hospitality, the UAE remains the pocket of strength for regional investments in the Middle East. FDI could increase in coming years as the UAE eases foreign ownership laws," said Anshu Vats, partner at AT Kearney Middle East.

The report highlighted the UAE's "well-developed infrastructure, strategic location, and tax-free base" as reasons for increased international investment.

It also cited a long-anticipated law allowing foreigners to own more than 49 percent of businesses in certain sectors outside of designated free zones which is awaiting cabinet approval and which could increase FDI in coming years.

The improved verdict on the UAE, which measures FDI inflows for 2012, came despite continued volatility in Bahrain, Egypt, Libya, Syria, Tunisia, and Yemen.

AT Kearney's report said: "With ongoing issues between Iran and the world's big powers, it is little surprise that FDI inflows to the Middle East and Africa dropped 10 percent to $91bn.

"Flows to the Gulf Cooperation Council countries also suffered from the post-crisis cancellation of large-scale investment projects.

"However, pockets of strength remain, with the UAE serving as a hub for regional investment. With strengths in logistics, tourism, and hospitality, the UAE recorded $9.6bn in inflows, up 20 percent from 2011."

Globally, 70 percent of corporate investors surveyed said they expect near-term recovery of their companies' FDI levels. Half see their budgets as already returned to pre-crisis levels and 20 percent expect a return by 2014.

"While investors are still in a holding pattern as they have been since the recession, they seem more optimistic and less jittery than they have in recent years," said Paul Laudicina, chairman emeritus of AT Kearney and chairman of its Global Business Policy Council.

"There's been a leveling effect this year between developed economies and developing nations in terms of foreign investment. The world seems to be slowly finding its footing."

The United States reclaimed first place in this year's FDICI for the first time since 2001.

US inflows are still below their 2008 peak of $306bn, but the country has made a gradual rebound mirroring that of the rest of the world, the report said.

China slipped to the number two position as higher labour costs raise questions about the longer term attractiveness of China's development model.

Brazil maintained its third place position with Canada and India rounding out the top five.

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