Foreign Direct Investment
Mobilizing International Resources for
Development in the ESCWA Region
Riad Meddeb
Division on Investment and Enterprise
I- FDI trends in ESCWA region
II- FDI and development : Challenges for
ESCWA countries
I
FDI TRENDS IN ESCWA REGION
ESCWA in Comparison
14
12
10
8
6
4
2
0
2002
2003
2004
2005
ESCWA: rate of return
Developing economies: rate of return
World: rate of return
Inflow: share in developing countries
Exports of goods and services: share in developing countries
GDP: share in developing countries
2006
FDI Inflows
400'000
Millions of US Dollars
350'000
300'000
250'000
200'000
150'000
100'000
50'000
0
2002
2003
ESCWA Total
2004
2005
Developing Economies
Source: UNCTAD, FDI/TNC database (www.unctad.org/fdistatistics/)
2006
Top Recipient Countries
Top 6 by FDI Inflows, 2006
Lebanon
Bahrain
Jordan
United Arab
Emirates
2006
Egypt
Saudi Arabia
0
5'000
10'000
Millions of USD
Source: UNCTAD, FDI/TNC database (www.unctad.org/fdistatistics/)
15'000
20'000
FDI Inflows by Country
FDI Inflows (in millions of US Dollars)
2002
2003
2004
2005
2006
Saudi Arabia
453
778
1'942
12'097
18'293
Egypt
647
237
2'157
5'376
10'043
1'307
4'256
10'004
10'900
8'386
Jordan
74
436
651
1'532
3'121
Bahrain
217
517
865
1'049
2'915
1'336
2'977
1'993
2'751
2'794
Qatar
624
625
1'199
1'152
1'786
Oman
122
494
229
900
952
Syrian Arab Republic
115
180
275
500
600
-2
0
300
515
272
Kuwait
4
-67
24
250
110
Palestinian Territory
9
18
49
47
38
102
6
144
-302
-385
5'008
10'457
19'831
36'767
48'924
United Arab Emirates
Lebanon
Iraq
Yemen
Total
Source: UNCTAD, FDI/TNC database (www.unctad.org/fdistatistics/)
Distribution of FDI flows among
ESCWA countries, by range,
2006
Range
Inflows
Outflows
Over $5 billion
Saudi Arabia, UAE,
Egypt
Kuwait
$3-4.9 billion
Jordan
$1-2.9 billion
Bahrain, Lebanon, Qatar
UAE
$0.5-0.9 billion
Oman, Syrian Arab
Republic
Bahrain Saudi Arabia
$0.1-0.4 billion
Iraq, Kuwait
Qatar, Oman
Less than $0.1 billion
Palestinian territory ,
Yemen
Lebanon, Syrian Arab
Rep, Yemen, Paletianian
territory and Jordan
Source:TNC database (www.unctad.org/fdistatistics/)
FDI Outflows
200'000
180'000
Millions of US Dollars
160'000
140'000
120'000
100'000
80'000
60'000
40'000
20'000
0
-20'000
2002
2003
ESCWA Total
2004
2005
Developing Economies
Source: UNCTAD, FDI/TNC database (www.unctad.org/fdistatistics/)
2006
FDI Outflows
Top 6 by FDI Outflows, 2006
Oman
Qatar
Saudi Arabia
Bahrain
United Arab
Emirates
Kuwait
0
1000
2000
3000
4000
5000
Millions of USD
Source: UNCTAD, World Investment Report 2007.
6000
7000
8000
9000
FDI Outflows by Country
FDI Outflows (millions of US Dollars)
2002
2003
2004
2005
2006
Kuwait
-77
-4'960
2'526
5'142
7'892
United Arab Emirates
413
991
2'208
3'750
2'316
Bahrain
190
741
1'036
1'123
980
Saudi Arabia
211
368
709
1'183
753
Qatar
-21
88
192
352
379
Oman
3
153
250
114
247
Egypt
28
21
159
92
148
0
40
213
122
71
119
57
48
61
55
39
61
21
26
36
2'907
-437
9'366
13'970
14'883
Lebanon
Syrian Arab Republic
Yemen
Total
Source: UNCTAD, FDI/TNC database (www.unctad.org/fdistatistics/)
Top Recipient Sectors
•
Services remained the dominant sector for FDI in the region,
a major proportion of which went to financial services.
•
There were also several large deals in telecommunications.
•
High oil prices have are attracting increasing FDI in oil and
gas-related industries.
•
GCC countries with large surpluses are rapidly increasing
expenditures on large infrastructure projects, which are also
attracting more FDI.
Diversifying Industries
•
The Gulf countries seeking to
diversify their production
activities beyond oil-related
activities have set up initiatives
to attract FDI into the
manufacturing sector.
•
One example is the
establishment of Free Trade and
Industrial Zones in the United
Arab Emirates.
•
The largest of these zones is
the Jebel Ali Free Zone in
Dubai.
Number of foreign firms in Jebel Ali
Free Zone, by nationality, 2005-2006
Number
Economy
2005
2006
Growth rate
(%)
Iraq
United Arab Emirates
India
Islamic Rep. of Iran
United Kingdom
United States
Germany
Pakistan
Japan
British Virgin Islands
Others
673
609
530
412
367
195
139
104
85
84
1 380
954
856
627
452
389
230
170
115
98
96
1 601
41.8
40.6
18.3
9.7
6.0
17.9
22.3
10.6
15.3
14.3
16.0
Total
4 578
5 588
22.1
Source: JETRO, 2006: 358
Qualified Industrial Zones
•
•
Jordan has taken a
similar approach with its
Qualified Industrial
Zones (QIZ).
These zones are
attracting investors to set
up manufacturing plants
to take advantage of
Jordan's preferential
trade agreements with
the United States and
Europe.
FDI Potential and Performance
High FDI performance
Low FDI performance
Front-runners
Below Potential
Bahrain, Jordan, Qatar, United
Arab Emirates
Kuwait, Oman, Saudi Arabia
Above Potential
Under-performers
Egypt, Lebanon
Syrian Arab Republic, Yemen
High FDI potential
Low FDI potential
Source: UNCTAD World Investment Report 2007
II
FDI AND DEVELOPMENT :
Challenge for ESCWA countries
CHALLENGE
The objectives and the challenge for
ESCWA countries is not just to stimulate
FDI fows, but private flows which lead to
Development
New Actors since 2002
•
Foreign investment originating from developing countries
has emerged as a new actor unforseen in the Monterrey
Consensus.
•
Private equipty funds and sovereign funds from
ESCWA(GCC) have become a essential source of FDI in
recent years.
•
Cross-border M&As by investors from ESCWA countries
with large current-account surpluses from high oil prices.
•
About two-thirds of cross-border M&As from the ESCWA
region in 2006 targeted developed countries, especially the
United Kingdom, Canada and the United States.
South-to-South Investment within ESCWA region
•
Investors from developing countries may have technologies and
business models more adaptable to the economies of FDI
recipients.
•
High oil prices are supporting high growth in oil-exporting
countries and some Gulf governments are spending much more
on infrastructure.
•
Most greenfield investments from ESCWA went to developing
countries in South, East and South-East Asia.
•
Increase of ESCWA investment in Maghreb countries.
•
However, investments from one ESCWA country to another within
the region is growing and needs to be encouraged.
Domestic Private Sector
•
Foreign direct investment provides capital for a country's economic
development, if the right policies and investment environment is in
place.
•
For example, FDI can effect technology and knowledge transfers to
the domestic private sector.
•
Encouraging entrepreneurship, especially in Small and MediumSized Enterprises, are an important component for strengthening
the local private sector.
•
In the right conditions, local companies can take advantage of these
transfers to improve their international competitiveness.
•
Encouraging FDI requires the right domestic and international
factors, including a transparent, stable and predictable operating
environment.
Encouraging Investment
•
Evaluate domestic law and regulations for investor friendliness. In
some areas, it may be possible to revise legal requirements to be
more streamlined and enforceable.
•
Provide a stable and predictable investment environment through
greater transparency and accountability in decision-making.
•
Develop a local supply of qualified labour by facilitating skills
transfer and human-resource development from foreign
companies investing in the host country.
•
Introducing competition to the domestic economy for more efficient
sectors and local companies that can be internationally successful.
Recent Investment-Friendly
Policy Developments
Qatar
•
•
In telecommunications, Qatar's Supreme Council of
Information and Communication Technology launched the
licensing process for a second fixed-line phone operator.
The Government is reportedly considering a revision to the
investment law to allow majority foreign participation in more
sectors.
Syrian Arab Republic
•
•
Introduce new law providing equal treatment between domestic
and foreign investors.
Create the Syrian Investment Authority to implement national
investment policies and to handle certain procdures for foreign
investors.
United Arab Emirates
•
•
The Government modified the Agencies Law so
companies can break contract with nonperforming
agents.
It is also preparing a law to open more economic
sectors to foreign ownership.
Saudi Arabia
•
•
•
The Government will start permitting FDI in previously
restricted sectors, such as mining, film distribution, air
transport, wholesale and retail trade, etc.
It will also start granting multiple-entry visas for
business people.
The Government will also establish industrial cluster
zones to encourage industrial investment.
Infrastructure
•
•
•
For continued growth, ESCWA countries will need to meet the
infrastructure demands of their economies.
The private sector can be deterred from taking on an entire
infrastructure project due to the large capital investment and long
project duration.
Public-private partnerships can combine the technical expertise
and management of the private sector with the capital of the
public sector.One challenge of public-private partnerships is the
need for Governments to have the necessary level of project
oversight.
Strenthening the cooperation between UNCTAD
and UNESCWA on Data Collection & Sharing
•
Data on FDI flows and the transactions of international
corporations is important
•
Accurate and recent data help governments and organizations to
formulate FDI policies to maximize development
•
Developing countries need help to augment their capacities in
data collecting and analysis
•
FDI data can aid in efforts for good governance and transparency
Challenges to FDI Growth
•
•
•
•
•
Security concerns and political uncertainties in certain parts of
the ESCWA region will continue to affect investor confidence in
these areas.
Trade barriers and domestic regulations remain as deterrents to
increased FDI and deregulation is needed to accelerate FDI and
economic growth.
Domestic workforces need the training and skills to increase
economic efficiency and the rate of return for investors.
By developing a healthy and competitive private sector, more
local companies are open to the transfer of new knowledge and
business models from foreign investors.
A business environment favourable to entrepreneurship and
innovation is needed to foster a strong, diversified private sector
for the long term.
Thank You
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