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Spate of pro-investor reforms to drive UAE FDI surge in 2022

Investor sentiment towards GCC states in general and the UAE in particular will improve further due to higher oil prices. As a result, the consolidated current account surplus will widen to $182 billion in 2022



The expected improvement in non-hydrocarbon revenues, recovery in volume of oil exports, higher oil prices, and continued restrained spending will lead to consolidated fiscal surplus of about three per cent of GDP in 2022 and 2023. — File photo
The expected improvement in non-hydrocarbon revenues, recovery in volume of oil exports, higher oil prices, and continued restrained spending will lead to consolidated fiscal surplus of about three per cent of GDP in 2022 and 2023. — File photo
by

Issac John

Published: Sun 16 Jan 2022, 5:18 PM

Foreign direct investment flow into the UAE is expected to see a significant surge in 2022 driven by enhanced pro-investor business environment, excellent infrastructure and predictable policies, the Institute of International Finance said on Sunday.

Investor sentiment towards GCC states in general and the UAE in particular will improve further due to higher oil prices. As a result, the consolidated current account surplus will widen to $182 billion in 2022, equivalent to 10 per cent of GDP, the IIF said.

Capital inflows will moderate in 2022 and 2023, as sovereigns are expected to issue less due to improving fiscal balances. Government-Related Entities (GREs) and the financial sector are expected to slightly increase their debt issuance.

“Under the assumption of oil prices averaging $75/b in 2022, the combined current account surplus will surge from $131 billion in 2021 to $182 billion in 2022, equivalent to 10 per cent of GDP. Also, the fiscal situations are now on a firmer footing. The expected improvement in non-hydrocarbon revenues, recovery in volume of oil exports, higher oil prices, and continued restrained spending will lead to consolidated fiscal surplus of about three per cent of GDP in 2022 and 2023,” said Garbis Iradian, chief economist, International Institute of Finance.

For the UAE in particular, 2022 will see it better positioned as one of the best destinations for FDI in the wake of a string of investor friendly reforms.

The UAE was the world’s 15th-biggest recipient of foreign direct investment in 2020, ranking one place above the UK and seven places higher than the prior year, according to the UN Conference on Trade and Development.

Although FDI flows plunged 35 per cent globally in 2020, investment into the UAE increased 11 per cent to almost $20 billion.

Following two years of sweeping reforms and new legislations including a revamped FDI and commercial companies law, the UAE unveiled this month the latest regulations governing labour relations to patent registrations are expected to boost investor confidence, promote ease of doing business and strengthen its non-oil economy as the country builds on reforms to make it a more competitive destination to live and work, analysts say.

The UAE Cabinet, in its first meeting of 2022, on January 14, approved new rules guaranteeing rights for employees, organising new types of work and protecting industrial property rights. It also adopted 13 agreements to encourage investment and avoid double taxation.

Iradian said the UAE recently allowed the creation of companies for acquisition or merger purposes to attract more investment into the UAE. “Other changes to the commercial companies’ law include allowing branches of licensed foreign companies to transform into UAE commercial firms and eliminating nationality requirements for members of companies’ boards of directors. Also, privatizing non-strategic GREs in the region and enforcing competition laws and regulations on all entities would attract more FDI, improve efficiency, and raise productivity,” said Iradian,

In 2020, the World Bank ranked the UAE among the top 16 countries out of 190 countries in terms of ease of doing business. Analysts expect the announced measures and new regulations will further improve the UAE’s business environment and rank the emirates among the top 10 best countries in the World in terms of ease of doing business by 2023.

In 2021, the UAE rolled out new legal reforms to help the country attract more foreign direct investment and support the growth of small and medium enterprises to strengthen its economy, according to experts and top executives. Ahead of the Golden Jubilee celebrations of the UAE’s formation, the nation approved the most extensive legal reforms in its history. These include greater protection of personal data, stronger copyright rules and stricter measures to tackle fake news. Other initiatives include amendments to the law on electronic transactions and trust services that give digital signatures the same weight as a handwritten signature. A law to protect industrial property and to regulate the procedures for its registration, use and assignment was also issued.

The government will also allow investors and entrepreneurs to establish and fully own onshore companies in almost all sectors, except activities deemed to be “strategic” as part of the new changes. With changes made around digital signatures, data protection, online security, copyright and the remit of onshore commercial companies, the Arab world’s second largest economy will attract greater investment to the UAE and strengthen the private sector’s competitiveness, analysts said.

The UAE was ranked 15th globally in Kearney’s 2021 FDI Confidence Index, up from 19th place in 2020. The UAE business environment demonstrated continued strengths in factors most important to investors, including government incentives for investors.

The country’s strong enabling environment, featuring advanced technological infrastructure and high innovation levels, is also central to its FDI attractiveness. The UAE is one of only five countries globally that achieved a higher ranking last year in an increasingly competitive global FDI attraction environment.

— issacjohn@khaleejtimes.com


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