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UAE records 10% surge in FDI to $23b to rank 16th globally

Global FDI flows in 2022 declined by 12% to $1.3 trillion

The UAE improved its position as the world’s 16th most attractive foreign direct investment (FDI) destination in 2022 by recording a 10 per cent surge in flows to $23 billion, the highest ever recorded, according to the World Investment Report 2023 issued by United Nations Conference on Trade and Development (Unctad).

In contrast, the global FDI flows in 2022 declined by 12 per cent to $1.3 trillion, after nosediving in 2020 and rebounding in 2021. The UN body expects the downward trend of global FDI to continue in 2023. Early indicators confirm the negative FDI outlook: FDI project activity in the first quarter of 2023 shows that investors are uncertain and risk-averse, the report said.

The UAE also has been ranked first in the Arab world in FDI inflows, and 16th globally in terms of FDI outflows that totalled $25 billion in 2022, up from $23 billion in 2021, the report said.

The UAE also figured in the report as a top recipient of greenfield projects in the world. The Arab world’s second-largest economy received the fourth-largest number of greenfield projects (997), an 84 per cent increase.

Two of the largest greenfield projects in the UAE included the building of a neutron therapy hospital, medical university and convention centre in Abu Dhabi by Star Energy (Austria) in a $1.8 billion joint venture with locally based Royal Strategic Partners and MIG Group, and the building of a $1 billion green hydrogen plant at Khalifa Industrial Zone in Abu Dhabi by Korea Electric Power (Republic of Korea), said the report.

“The United States remained the largest host for announced greenfield projects and international project finance deals, followed by the UK, India, the UAE, and Germany for greenfield projects, and by India, the UK, Spain, and Brazil for project finance deals,” said the report released on Wednesday in Abu Dhabi.

The top 20 FDI destinations include United States, China, Singapore, Hong Kong, Brazil, Australia, Canada, India, Sweden, France, Mexico, Spain, Japan, Poland, Israel, the UAE, Indonesia, Italy, Chile and the Republic of Korea.

The number of international project finance deals also rose in most regions, although more modestly. The most significant rise was in India, where project numbers increased by 64 per cent, making it the recipient of the second-largest number of international project finance deals, said the report.

In the Middle East, FDI fell by 14 per cent to $48 billion, despite strong activity in greenfield projects and cross-border M&As. The number of greenfield projects rose to more than 1,800 – two thirds higher than 2021 – and the value of cross-border M&As increased by 18 per cent.

“The prospects for international investment looked extremely gloomy last year, with a cascading crisis of health, climate change and economic shocks causing investor uncertainty around the world. Rising inflation, fears of a recession and turbulence in financial markets put many investment plans on hold at the beginning of the year. In the end, international investment flows did suffer, but proved more resilient than expected,” said Rebeca Grynspan, secretary-general of Unctad.

While global FDI declined by 12 per cent last year to $1.3 trillion, the slowdown was limited, investment flows to developing countries increased marginally, and investors finished the year announcing new projects in both industry and infrastructure, said Grynspan.

Flows to Saudi Arabia fell by 59 per cent to 7.9 billion. Cross-border mergers and acquisitions sales remained high. Among the largest deals was the $16 billion acquisition of a 49 per cent stake in Aramco Gas Pipeline by an investor group from the United States, China, Saudi Arabia, and Hong Kong, China.

“The multitude of crises and challenges on the global stage – the war in Ukraine, high food and energy prices, risks of recession and debt pressures in many countries – negatively affected global FDI. International project finance values and cross-border M&As were especially shaken by stiffer financing conditions, rising interest rates, and uncertainty in financial markets,” Unctad report said.

The value of international project finance deals fell by 25 per cent in 2022, while cross-border M&A sales were 4 per cent lower. “The global environment for international business and cross-border investment remains challenging in 2023. Although the economic headwinds shaping investment trends in 2022 have somewhat subsided, they have not disappeared,” the report added.