The UAE has ranked 14th globally and first in the region in Kearney’s 2022 Foreign Direct Investment (FDI) Confidence Index.
The country is one of only four emerging markets on the 2022 index along with Qatar, China, and Brazil, and has recorded a higher ranking this year in an increasingly competitive global FDI attraction environment.
Rudolph Lohmeyer, partner, National Transformations Institute, Kearney Middle East, said: “The UAE’s steady rise in the rankings in the past years speaks to the power of consistency and momentum. With Expo 2020, the country had a surge of tourism and new businesses opportunities. These have contributed to the growth of the country’s GDP, new job opportunities at various levels, and an estimated foreign direct investment of $33.2 billion (AED 122 billion).
“The success of the World Expo coupled with the UAE’s continued investment in advanced technological infrastructure has diversified the economy, making the country more attractive for investors.”
The business environment in the UAE has continued to strengthen based on factors that are most important to investors, including growing technological and innovation capabilities.
Central to the country’s attractiveness as a business and financial hub are plans to deepen trade ties with fast-growing economies in Asia and Africa with the aim to invite $150 billion in foreign investment.
Kearney projects a strong average growth of 5.4 percent over the next three years, bolstered by institutional reforms to promote trade and investment and improve the ease of doing business in the country.
The report from the global strategy and management consulting firm is an indicator of future FDI flows around the world, and the rankings reveal rebounding investor optimism about the global economy.
The results illustrate both areas of business leader foresight as well as blind spots regarding the changes that were on the immediate horizon.
Findings from the latest report suggest a continued shift in FDI to developed markets, capitalising on destinations marked by regulatory transparency and stability.
Investors cite transparency of government regulations and lack of corruption as the most important overall factors when choosing where to make FDI.
Commenting on the 2022 FDI Confidence Index, Paul A. Laudicina, the founder of the index and Kearney’s Global Business Policy Council, said: “Entering year three of the pandemic, investors seemed much more hopeful about the global economy and FDI flows than they did just a year ago.
“They did, however, have concerns that a rise in commodity prices, escalating geopolitical tensions, and persistent inflation were likely in the year ahead. Just a few months into the year, these concerns have come to fruition and been exacerbated by the Russian military actions in Ukraine.”
Focus on FDI based on ESG commitments
This year’s report also includes a thematic section that reflects on how investors view their companies’ environmental, social, and governance (ESG) commitments as well as those of their foreign investments.
“Investors are clearly enthusiastic about pursuing ESG commitments,” said Erik Peterson, managing director of the Global Business Policy Council and co-author of the study.
Indeed, a striking 94 percent of investors agreed that their respective companies had developed a strategy to achieve their ESG commitments, 89 percent view their company’s ESG commitments as a source of competitive advantage, and 73 percent said their ESG commitments had become stronger over the past three years.
They also point to the role that ESG can play in improving supply chain issues and boosting productivity as among the most important factors driving their company’s commitment to ESG.
Peterson added: “Investors are still frequently split on which ESG goals to prioritise and how to measure them.”
Laudicina concluded “The title of our 2022 FDI Confidence Index®, Optimism dashed, should be qualified: For how long? While global developments have certainly transformed the world, this does not preclude investors from building on existing momentum or pursuing new opportunities that arise.
“Focusing on investing in key sectors such as infrastructure and implementing ESG strategies sooner rather than later at home and abroad will provide a solid path forward for investors and companies, and ultimately help to build a stronger, more enduring investment environment consistent with fundamental changes evolving in global business conditions.”
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