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Foreign Direct Investment (FDI) to GCC countries in 2012 as a whole remained at almost the same level as in 2011 ($ 26 billion), registering a slight 0.4% increase, despite the strong decline registered in Saudi Arabia, a new UN report has revealed.
According to the United Nations Conference on Trade and Development (UNCTAD) World Investment Report 2013, the latter was offset by significant FDI growth in all other countries within this group.
"FDI to the United Arab Emirates - West Asia's third largest recipient country - increased 25%, to $ 10 billion, continuing the recovery initiated in 2010 but remaining below the $14 billion reached in 2007. High public spending by Abu Dhabi and strong performance in Dubai's non-hydrocarbon sectors have helped rebuild foreign appetites for direct investment in the country," the report said.
Saudi Arabia and the UAE alone accounted for 83% of FDI inflows to the GCC economies. FDI to Kuwait more than doubled, reaching $ 2 billion, boosted by Qatar Telecom's acquisition of additional shares in Kuwait's second mobile operator Wataniya, which raised its stake to 92%.
FDI inflows also increased in Bahrain, Oman and Qatar. FDI to West Asia in 2012 registered its fourth consecutive year of decline, although at a slower rate, decreasing by 4% to $ 47 billion, half its 2008 level.
Growing political uncertainty at the regional level and subdued economic prospects at the global level are holding back foreign investors' propensity and capacity to invest in the region.
The FDI fall in Saudi Arabia occurred despite the 6.8% economic growth registered in 2012, boosted by heavy Government spending - on upgrading infrastructure and increasing public sector employment and wages.
Looming uncertainties related to social and political tensions, together with the shrinking availability of debt capital from the ailing banking sectors in developed countries, have restricted foreign investors' propensity and capacity to invest, putting the brakes on an FDI recovery, the report said.
