Foreign direct investment in Middle East falls by a quarter

FDI has decreased

According to a new report by the United Nations Conference on Trade and Development (UNCTAD), foreign direct investment (FDI) in the Middle East has fallen by almost a quarter over the past year, thanks in part to the tightening of credit markets.

The report stated that cross-border mergers and acquisitions as well as development projects in the region involving large FDI were badly hit, with inflows falling by a 24 percent to US$68 billion this year. After six years of consecutive increases, this is quite a major drop.

UNCTAD´s World Investment Report reveals that FDI reductions have occurred in almost all countries in the region, except Qatar which is expected to lead the Middle East Gulf region in terms of infrastructure projects for the next four years.

Qatar actually saw a rise in FDI with an increase of 112 percent in 2009. Other countries that saw an increase included Lebanon with an 11 percent growth.

As one would expect, Dubai was hit hard with the debt crisis sending the emirate reeling, and a decline of FDI by 71 percent.

Saudi Arabia remained the largest recipient of FDI, after Qatar, with total influx reaching $36 billion.

Foreign direct investment out-goings

Throughout the region, FDI outflows fell by 39 percent last year to US$23 billion, with most of the decrease coming from the UAE, which saw a fall from US$16 billion to US$3 billion.

In terms of investment, Kuwait took the lead with US$9 billion going into other countries. Saudi Arabia followed with US$6.5 billion, a massive US$5 billion increase on the year before.

"The Dubai financial crisis downgraded the country´s position from largest outward investor in the region to third largest," the report said.

"On the other hand, outward investment prospects are mixed in the short term: Qatar´s sovereign wealth fund (QIA) is seeking investment opportunities in Europe, Asia and the United States, while state-owned entities from other investor countries have refocused their attention onto their domestic economies."

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