Business and FinanCe

Opening the door to foreign investment in the Arab world
by pamela ann smiTh

W

The opporTuniTies will be endless if the region works on its investor friendliness
28 The Middle easT May 2008

hile the world’s attention has been focused on the huge influx of petrodollars flowing to Arab oil producing countries, another source of bounty has also arrived without much notice: foreign direct investment (FDI). Figures from the UN show the Arab world is now reaping some $60bn a year from these investments, more than twice the $24bn recorded in 2004. Saudi Arabia, the UAE, Egypt, Jordan, Tunisia and Morocco have been the main beneficiaries. Other countries, such as Kuwait, Lebanon, the Palestinian Territories and the Yemen, are being increasingly left out, either because of the slow pace of their economic reforms or because of investors’ concerns about geopolitical risks. The latest figures published this year by the United Nations Conference on Trade and Development (Unctad) show that Saudi Arabia topped the Arab world with an influx of more than $18bn in 2006, 51% more than in 2005 and more than nine times as

much as in 2004. Efforts by the Saudi Arabian Investment Authority (SAGIA) and other government agencies, as well as by the country’s Chambers of Commerce and Industry and its expanding private sector entrepreneurs appear to have paid off handsomely as long-awaited reforms began to take effect. In particular, as Unctad’s World Investment Report for 2007 points out, the kingdom’s policies aimed at diversifying its revenues away from irreplaceable resources such as oil and gas to obtain a stream of earnings that is less subject to volatile global market forces, resulted in a substantial rise in FDI in manufacturing industries, as well as in infrastructure and services during 2006. This trend continued into the first half of 2007 as well. Unlike foreign investment in paper and financial assets, such as the stock exchange, FDI can bring much needed funds to areas such as education and health, telecoms and other utilities, housing, tourism and

visiTors From around the world flock to Dubai to enjoy events such as the 2008 horse racing world cup. now regional neighbours – keen to diversify their economies – hope to emulate the emirate’s success

The Middle easT May 2008

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