By Andy Sambidge
United Nations Economic and Social Commission predicts further declines in 2009.
Foreign direct investment (FDI) into the Middle East region fell by more than six percent in 2008 and is expected to decline further this year amid the global economic crisis, according to a new report.
The United Nations Economic and Social Commission said FDI inflows to the Western Asia (ESCWA) region, which covers 14 Arab countries, were down to around $60bn in 2008, down from $64bn in 2007.
And ESCWA experts expect FDI to the region to further decline in 2009 as a result of the global economic slowdown, which has led to delays in the implementation of a number of investment projects, the report added.
The report identified three countries that captured the lion's share of total FDI flows to the ESCWA region in 2008 - Saudi Arabia, the UAE and Egypt, reported news agency WAM.
They accounted for nearly 76 percent of FDI flows to the region.
"The performance of these countries is mainly attributed to their successful endeavours to ameliorate their business environment and to their overall investment-friendly climate," the report said.
In 2008, FDI to Saudi Arabia amounted to $22.5bn, down from $24.3bn a year earlier, a 6.5 percent decline. Foreign investments in the kingdom mainly targeted the real estate sector (21 percent), petrochemicals (16 percent), and the mining industry (10 percent).
In 2008, the UAE attracted nearly $13.7bn, a decrease of 3.2 percent compared to 2007.
FDI flows in 2008 also slumped in such other ESCWA member countries as Kuwait, Oman and Yemen, the report added.
Five ESCWA countries saw an increase in FDI during 2008 including Bahrain, Jordan, Lebanon, Sudan and Syria.
The report said that FDI flows to the ESCWA region were concentrated in three main areas of petrochemicals, financial services and the real estate while the US, Japan, UK and France were among the biggest contributors.
The report highlighted several deficiencies still hampering the business and investment environments in ESCWA member countries.
These included time-consuming procedures for obtaining licences and implementing contracts, and the lack and/or incompetence of commercial courts to settle disputes between foreign investors and local parties.
"These impediments deter foreign investors from increasing their assets in many ESCWA member countries and deprive the latter from tapping into gains inherent to FDI," the report added.