By Andy Sambidge
Saudi Arabia's FDI slumps by a quarter but is still Arab world's biggest at $12.1bn - study
Foreign direct investment in Arab countries rose by nearly 10 percent last year despite the impact of the Arab Spring, a new report has said.
The Arab Investment & Export Credit Guarantee Corporation, also known as Dhaman, said in its annual report that FDI inflows increased 9.8 percent to reach $47.1bn, compared to $42.9bn in 2011.
Out of 20 Arab countries with available data for 2012, a total of 15 countries witnessed increases in FDI inflows, the report showed.
Saudi Arabia and the UAE attracted the lion's share of FDI with 25.8 percent and 20.4 percent of the total respectively.
However FDI to Saudi Arabia dropped by a quarter compared to the previous year to $12.1bn while the UAE gained 25 percent, rising to just over $9.6bn.
Kuwait saw one of the largest growths in FDI in 2012, according to the figures, as it more than doubled to $1.8bn. The country has announced plans to set up a government authority to promote foreign investment into the country as it moves towards diversifying its economy.
Dhaman has also launched its Investment Attractiveness Index which ranks the attractiveness of 110 countries.
Globally, the US ranked first as the most attractive destination for investments, followed by Germany, UK, Switzerland, Netherlands, France, Belgium, Hong Kong, Japan and Canada, respectively.
In the Middle East, the UAE topped the list, ranking 38th globally, followed by Kuwait which ranked 41st, Bahrain 43rd, Qatar 49th, Oman 54th, and Saudi Arabia 56th.
The report showed that GCC economies are the most attractive destination for investments in the Arab region.
"The GCC countries have fueled growth in infrastructure, backed by their large oil and natural gas reserves, current account surpluses, politically stable economies, liberal business environment and strategic geographical locations," it said.
The report added: "There is considerable dispersion across Arab countries with respect to the ten key drivers, due to variation in countries economic stages, investment attraction practices, such as tax incentives, relying on natural resources or sound macroeconomic frameworks etc.
"However, it is still evident that most Arab countries show strong deficits in almost all criteria that affect differentiation-technological performance. This deficiency is particularly debilitating for attracting technology seeking or sourcing FDI. It limits the positive externalities and productivity effects expected in particular from MNEs investment decision."For all the latest banking and finance news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.