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Saudi Arabia, UAE among top recipients of FDI in West Asia

JEDDAH — Saudi Arabia, Turkey and the United Arab Emirates are the main recipients of foreign direct investments (FDIs) in West Asia, together accounting for almost four-fifths of total inflows to the region.

Saudi Arabia was the second largest FDI target, receiving $18 billion, an increase of 51 per cent, followed by the UAE, where inflows declined by 23 per cent to $8 billion.

A few large cross-border mergers and acquisitions (M&As) and the privatisation of financial services made Turkey the largest recipient with inflows doubling to $20 billion last year.

FDI inflows to the 14 economies of West Asia surged by 44 per cent last year to an unprecedented $60 billion, according to an annual survey of investment trends.

The World Investment Report 2007, published by the United Nations Conference on Trade and Development (UNCTAD), attributed the increase to the region's strong economic growth, improved business climate and high oil prices, which have been attracting increasing amounts of FDI in oil and gas and related industries.

There were also several major deals in telecommunications in Jordan and Turkey. Efforts by Gulf countries to diversify their production activities beyond oil-related activities succeeded in attracting greater FDI flows to the manufacturing sector.

FDI outflows from West Asia totalled $14 billion, an increase of five per cent. These targeted mainly oil and gas and related industries, telecommunications, tourism and financial services.

The value of cross-border M&As by investors from West Asia increased by 78 per cent, amounting to $32 billion, as a result of high oil prices and the current account surpluses of oil-producing countries.

About two-thirds of those M&As were targeted at developed countries, in particular the UK, 35 per cent by value, Canada 11 per cent and the US nine per cent.

Kuwait accounted for more than half of the region's total outward FDI, mainly in the telecommunications industry.

About 67 per cent of the total value of cross-border M&As involved firms from the UAE, the second largest investor from West Asia.

Other important sources of FDI were Bahrain, Turkey and Saudi Arabia.

The report said that in light of the region's high GDP growth and ongoing economic reforms, the upward trend in inward FDI to West Asia is likely to continue.