Minister calls for effort to increase FDI inflow

DUBAI - Dr Mohammed Khalfan bin Kharbash, UAE Minister of State for Financial and Industrial affairs, has called for a regional effort to increase Foreign Direct Investment (FDI) inflows and offset the region's historical failure to promote the Arab world as an attractive destination for global investments. Dr Kharbash was speaking at a special session focused on driving a new regional momentum to encourage more FDI at the on-going three-day International Investment Summit in Dubai.

By A Staff Reporter

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Published: Mon 5 May 2003, 12:38 PM

Last updated: Wed 1 Apr 2015, 9:11 PM

"One-stop investment authorities must work rapidly and systematically to offset the FDI deficit in the Middle East and position the region as a critical location on the radar screen of international investors," Dr Kharbash said pointing out the success of the Dubai Development and Investment Authority (DDIA), Saudi Arabia's SAGIA and other regional bodies. "We must work collectively to market our region as a competitive, high-return and sustainable FDI centre." He said that FDI is more critical to economic growth and stability in the Middle East than ever before. He said: "We have an unprecedented political will throughout the Arab world to speed up the process of economic liberalisation and a very real need to secure private sources of funding and reduce the burden on governments. "A major driver of FDI inflows in recent years has been Merger and Acquisition activity and there is a huge potential for this kind of consolidation in the region." However, he noted that the region has historically failed to capture its fair share of FDI. "During the period 1989 to 1999, the Arab world received only 2.5 per cent of the total flow into developing countries despite contributing 8 per cent of total global GDP. In 2001, Foreign Direct Investment rose to $6 billion but this was still less than one per cent of the global total.

He said: "In infrastructure projects alone, estimates for the region suggest that $300-400 billion will be needed over the next two decades. In the coming 12 months, it is expected that such projects will require around $45 billion and this figure could rise further depending on the reconstruction effort in Iraq."

Dr Kharbash noted that FDI is attracted through three key drivers: strong economic growth, financial/non-financial incentives and a transparent operating environment noting that the UAE had made significant inroads in all three.

"The UAE has reported average economic growth of around 6 per cent for nearly two decades, a range of diverse investment opportunities and a sound commitment to good governance," Dr Kharbash said. He also noted that the level of domestic investment, a critical "pull factor" for international investment, had been very active in a variety of non-oil sectors.

Other factors contributing to the success of the UAE, the Minister said, include the strength of the financial sector, which last year alone saw an 11 per cent rise in total bank assets, and the strong partnership between the public and the private sector reflected in IPP and BOT projects such as Al Taweelah A2 and Umm Al Naar.

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