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UAE among top destinations attracting capital from across the globe: New report

Abu Dhabi has been termed the ‘Capital of Capital’ as it was named the richest city in the world, thanks to its $1.7 trillion sovereign wealth funds

Published: Mon 9 Dec 2024, 1:31 PM

Updated: Mon 9 Dec 2024, 9:21 PM

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The UAE is among the top destinations attracting capital as the world is experiencing a redirection of capital flows and with the emergence of a new economic order, according to a new study released on Monday.

“The cases of the UAE, Singapore, and Malaysia demonstrate the growing influence of pull factors. Political, exchange rate and financial stability all act as additional incentives attracting global capital flows," according to “A New Era of Capital Flows in a Polycentric World” report.

"Following comprehensive structural market reforms and measures taken to increase the market’s attractiveness to foreign investors, the UAE and Singapore are seeing record foreign direct investment inflows, while Malaysia’s services and production sectors are flourishing thanks to major investments coming from countries such as Hong Kong, Japan, and the US,” added the report.

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The study was developed by ADQ in collaboration with Abu Dhabi Finance Week and Abu Dhabi Global Market, and with Stern at NYU Abu Dhabi as an academic advisor.

This comes as Abu Dhabi has been termed the ‘Capital of Capital’ as it was named the richest city in the world, thanks to its $1.7 trillion sovereign wealth funds.

The study added that global capital flows are originating from a wider set of contributors and are being directed to an increasingly diverse set of destinations.

“The emerging pattern is consistent across the portfolio, trade and foreign direct investment flows. While capital flows have primarily been steered by global factors such as liquidity and market volatility in the past, the significance of domestic pull factors such as economic growth, trade openness, or investor sentiment is rising,” it said.

Previously, the UAE’s economic surpluses were mostly invested abroad, but now investments at home have emerged as a focus.

Therefore, the UAE is looking to double cumulative foreign direct investment (FDI) to Dh1.3 trillion and reach a total FDI balance of $600 billion by 2031.

“The UAE’s dual role as an importer and exporter of capital creates a dynamic investment environment. To maximise the impact of capital flows, the UAE has diversified its investment sources, encouraging investments from both greenfield and M&A activity, across a range of sectors,” Mohammed Al Hawi, Undersecretary of the Ministry of Investment of the UAE, was quoted as saying in the report.

Sovereign wealth funds

The volume of capital globally coming from global growth markets has indeed increased significantly over the last 20 years, even more in the last five years.

The increase in growth market capital is most evident when examining sovereign wealth funds (SWFs).

Today, there are 176 recognized SWFs around the world, an increase of 73 during the last decade alone. The growth in the aggregate size of the funds now managed by SWFs has increased to over $12 trillion – doubling over the last twenty years.

“The geographic distribution of these funds has changed significantly. Nearly all of the new SWFs come from the global growth markets that lie between the G7 and the more frontier markets, although both the US and the UK have discussed plans to establish their own SWFs,” said the report.

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