Text size:

  • Small
  • Normal
  • Large
Banks and the housing market both received a boost last year. Reuters
Banks and the housing market both received a boost last year. Reuters

Capital flows into Emirates rise 40%

Capital flows into the UAE rose 40 per cent to $7.6 billion last year from 2010 as the country proved a haven for investors from turmoil elsewhere in the Arab world.

Capital flows into the UAE rose 40 per cent to US$7.6 billion (Dh27.91bn) last year from 2010 as the country proved a haven for investors from turmoil elsewhere in the Arab world.

Foreign direct investment (FDI) into most other regional countries fell, according to data collated in a report by the United Nations Conference on Trade and Development (Unctad).

It warned that FDI prospects for the region this year were still negative as a result of global and regional uncertainties.

"GCC countries are still recovering from the suspension or cancellation of large-scale projects in previous years," according to the report. "They registered a drop of 35 per cent in FDI inflows."

The data backs up other signs that showed the UAE benefited from instability elsewhere.

Banks and the housing market both received a boost last year as Arabs from countries rocked by unrest parked their cash with lenders and snapped up property. FDI inflows to Bahrain and Kuwait also rebounded last year.

Saudi Arabia, the region's largest recipient, had a 42 per cent fall to $16bn last year. Flows to Oman and Qatar also dropped back.

The decline was consistent with a general negative trend noted by Unctad in the west Asia region, which includes the GCC, the Levant and Turkey. Flows dropped 16 per cent to $49bn last year, affected by both the continuing political instability and weaker global economic prospects in the second half of the year.

Political and social unrest halted FDI flows to Syria and Yemen. A slowdown in Lebanon's property sector as a result of spillovers from regional unrest and the global financial crisis meant flows to the country were disrupted.

Overall, the regional FDI level is the lowest since 2005 - when flows stood at about $44bn - and far below the record high of about $92bn registered in 2008. Since then a number of schemes were either suspended or cancelled as a result of project financing drying up.

"After a period of calm and consolidation, projects started slowly coming back on line in 2010 but soon faced delays caused by the Arab uprisings across the region during 2011, and by new uncertainties about global economic prospects," according to the report.

Data from North Africa suggested unrest had a similar impact. Traditionally, the recipient of about a third of inward FDI to the continent, inflows halved last year to $7.69bn. Inflows to the two major recipients, Egypt and Libya were negligible, Unctad said.

As well as regional instability, FDI flows have also been strained by tougher access to capital markets as a result of the uncertain global economy. Funding from other sources has emerged to take up some of the slack.

Export credit agencies, in particular from Japan and South Korea, and other regional bank lenders helped to finance big projects with strong sponsors.

But the UN agency warned the outlook for this year remained rocky. "FDI inflows will continue declining in 2012, judged by preliminary data on cross-border merger and acquisition sales and greenfield investment for the first five months of 2012 as uncertainties at the global and regional levels are likely to cause foreign investors to remain cautious about their investment plans in the country," the report said.

In the longer term, however, the concentration of oil wealth in the region and the strategic need to diversify away from hydrocarbon sectors would create business opportunities and revive the region's attractiveness for foreign investors.

tarnold@thenational.ae

twitter: Follow and share our breaking business news. Follow us

iPad users can follow our twitterfeed via Flipboard - just search for Ind_Insights on the app.

Back to the top

More articles


Editor's Picks

 The Greens, villas: Q1 no change. 3BR - Dh210-250,000. 4BR - Dh210-260,000. 5BR - Dh220-300,000. Q1 2013-Q1 2014 5% rise. Pawan Singh / The National

In pictures: Where Dubai rents have risen and fallen, Q1 2014

Find out how rental prices in the prime locations in Dubai have altered during the first three months of the year and the current rates you will pay according to data provided by Asteco.

 Miele coffee maker making Cappuccino at Miele Gallery in Sama Tower in Dubai. The cost of this coffee maker is around Dh 17,000. Pawan Singh / The National

Space-age coffee comes at a price from Miele

Miele have taken the coffee machine to a new level with its Dh17,000 offering that is built into your kitchen.

 The bridge of Seajacks Hydra, as the wind farm installation vessel undergoes finishing touches and testing works at Lamprell’s Hamriyah facility in Sharjah before its planned delivery on June 2, 2014. Jeffrey E Biteng / The National

In pictures: Building the Seajacks Hydra

The Seajacks Hydra, a wind farm installation vessel, is undergoing finishing touches and testing works at Lamprell’s Hamriyah facility in Sharjah before its planned delivery on June 2, 2014.

 The Wind, Energy, Technology and Environment Exhibition takes place from April 14 to April 16. Above, the Dewa showroom during last year’s Wetex. Jaime Puebla / The National

April corporate and economic calendar for the UAE and overseas

From Cityscape to Wetex to stock-market holidays to nations reporting first-quarter GDP figures, here is our helpful calendar of April's business events in the UAE and internationally.

 The rush of new supply of hotel rooms pushed Dubai occupancy rates down to 87 per cent. Sarah Dea / The National

Dubai hotel room rates rise 10 per cent

The rush of new supply pushed occupancy rates down to 87 per cent, a dip of 2.6 per cent from the previous year. Winter months are the strongest for Dubai hotels, with occupancy and prices falling to half their peaks by July.

 Get the latest information on credit cards, bank accounts and loan products in the UAE. Mark Lennihan / AP Photo

Rates report: Latest on UAE loans, accounts and credit cards

Souqamal.com brings you the latest interest rates on banking products in the UAE.

Events

To add your event to The National listings, click here

Get the most from The National