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UAE sees big FDI inflow

DUBAI — The UAE is set to witness a major surge in foreign direct investment following the new impetus given to global investor confidence in the wake of the accession of His Highness Shaikh Mohammed bin Rashid Al Maktoum as the Vice-President and Prime Minister of the country and the Ruler of Dubai last week.

"For the global investor community, the smooth transfer of the mantle to Shaikh Mohammed, the visionary behind Dubai economic miracle, is a strong endorsement of its overriding confidence in the UAE's vibrant economic growth and pro-business environment. Consequently, the UAE, and Dubai in particular, will witness a stronger flow of foreign direct investment (FDI) in the coming years," leading investment advisers said.

Over the past few years, FDI flow into the UAE has been on the ascendancy against the backdrop of an all round economic buoyancy supported by government's progressive and liberal investment policies. Last year saw a remarkable surge in FDI flow to the country with a total of $18.72 billion being invested in 160 projects, according to LocoMonitor, a leading market research tool for tracking and analysing foreign direct investment projects. Compared to 2004, when the total FDI attracted by the Emirates dropped to $1.3 billion from the previous year's $2.47 billion, 2005 was a landmark year for the UAE in terms of luring foreign investments, they point out.

According to sources, since 2002, some 549 FDI projects have been launched in the UAE. "The trend is that most emirates are coming more strongly into global investor focus with Dubai emerging as one of the world's most sought-after FDI destination with a wide range of lucrative investment avenues on offer," they point out.

"Given the reinforced optimism about the long-term sustainability of UAE's economic growth and the increased scope offered by its stock markets and burgeoning industrial sectors including a spate of free zones and special investment parks, 2006 will see a phenomenal surge in foreign direct investments. With Shaikh Mohammed now in the saddle and in command the whole of the UAE will benefit from his inspiring vision and pragmatic approach," they said.

On top of this, the landmark law enacted by Abu Dhabi government to attract FDI into the emirate by allowing 100 per cent ownership for foreign investors in the Industrial City of Abu Dhabi (ICAD) will help add a new momentum to overwhelming investor enthusiasm. Following Dubai's successful example, a dozen other sector-specific industrial clusters that are poised to come up in a phased manner in the next three to four years will also have the 100 per cent ownership option.

"A law has been enacted that will give regulatory powers to Higher Corporation for Specialised Industrial Zones (HCSEZ) to deliver on Abu Dhabi's new economic diversification drive by developing a new economic model of public private partnership, granting companies 100 per cent ownership, issue licences and permits, provide tax exemptions, issue customs duty deferrals, carry out municipality functions and provide utility services," Shaikh Hamad bin Zayed Al Nahyan, chairman, Abu Dhabi Economic and Planning department, said.

HCSEZ, designed as a new engine that will drive economic development and diversification of Abu Dhabi, is in the process of creating economic zones for basic metals, building products and construction materials, oil and gas services, agricultural and food services, paper and wood products, automotive industries, logistics services, high-tech industries, financial services, pharmaceuticals, medical sector and chemical and petrochemical industries.

The International Finance Corporation (IFC), which acts as the private sector investment arm of the World Bank rates the UAE as one of the best investment locations in the Arab world. IFC ranks countries according to a number of benchmarks. These include starting a business, dealing with licences, hiring and firing registering property, obtaining credit, protecting investors, paying taxes, trading across borders, enforcing contracts and closing a business.

On the UAE stock markets, following the drive initiated by the government to attract foreign investments in listed firms, more foreign investments will flow, while the activity of the primary offering market will be invigorated in terms of floating public corporate shares for public subscription and listing shares in the Dubai Financial Market. Foreign or non-UAE investment has played a major role in reinforcing the local market liquidity and expanding the speculators and traders base. In this respect, the total foreign trading recorded during the first ten months of 2005 have equalled Dh73 billion or $20.2 billion with a strong regional focus from intra-Arab investment.