More than US$10 billion (Dh36.73bn) in foreign investment poured into the UAE last year, making it the leading destination for the number of foreign direct investment (FDI) projects in the Middle East and Africa.
A total of 328 projects were launched, up 13 per cent from the previous year, data from FDI Intelligence shows. The rise comes despite a muted year globally for FDI as jitters about the euro zone, the United States and unrest in the Arab world knocked investor sentiment.
"Economic and political instability in Europe, North Africa and the Middle East led many companies to put on hold their FDI plans, leading to a sharp decline in FDI in many countries," the report said.
Plans to ease foreign ownership laws form part of the UAE's goal to capture an even greater share of overseas capital flows. In December, the federal Cabinet adopted major changes to the companies law, which is likely to lead to a relaxing of a 49 per cent cap foreigners are allowed to hold in some businesses outside free zones.
But the UAE is also a major source of outward foreign investment.
UAE investors were the most active foreign investors in the Middle East and North Africa in projects last year. But the uncertain sentiment still weighed on local investors' appetites, with the number of overseas projects from the Emirates falling by 3 per cent and capital investment by 43 per cent.
"This was largely due to continued decline in real estate FDI, with UAE companies investing in 57 per cent less real estate projects in 2011 than 2010," said the report.
Regionally, Saudi Arabia attracted the most capital investment. Inflows into the kingdom grew by 40 per cent last year to just over $14bn, but still far short of the $42bn in capital investment captured by Saudi Arabia in 2008.
The fallout from the Arab Spring had a dramatic impact on FDI to pockets of the region. Numbers of FDI projects in Libya and Yemen fell by 80 per cent and 29 per cent, respectively. Declines of 26 per cent and 14 per cent were felt in Syria and Tunisia, respectively.
Despite political upheaval in North Africa, Africa as a whole was the growth hotspot last year, with a 24 per cent rise in FDI projects.
Vast natural resources across the Middle East and Africa meant coal, oil and natural gas were the leading investment spots. An estimated $35bn flowed into projects linked to those commodities, the data showed.
Globally, the number of FDI projects rose by 5.6 per cent last year, faster than the 3 per cent rise the previous year. Estimated investment linked to FDI rebounded from a 14.5 per cent fall in 2010 to record 1.2 per cent growth during the year. Total investment reached $860bn.