Global FDI Flows Fall 8% In 2014 As Economic Growth Falters

Global FDI flows fell by eight per cent to reach $1.3 trillion last year, down from $1.4 trillion in 2013 amidst slowing economic growth, according to the Annual Investment Report 2015.

The year also marked an interruption in the recovery of global FDI flows, which were gradually rising from their fall back towards their all-time high of $1.9 trillion in 2007.

The fall in FDIs last year was mainly due to the economic uncertainty in Europe, Karl P. Sauvant, a resident senior fellow at Columbia Centre on Sustainable Investment and the author of the report, said in his opening remarks at the ongoing Annual Investment Meeting (AIM) in Dubai.

He added that such a fall was temporary and that FDIs are expected to rise in 2015 in line with the projected economic growth.

However, the fragility of the Eurozone and declining commodity prices could act as a dampener in attracting foreign investments, the report noted.

According to UAE’s minister of Economy Sultan Saeed Al Mansoori, FDI in the UAE rose by 25 per cent to reach $13 billion last year.

Although foreign investments to the country showed a year-on-year growth, the amount fell short of the $14.4 billion predicted by the UAE’s Ministry of Economy.

It is still unclear how external challenges such as oil price volatility and domestic conflict in Yemen could impact foreign investments to the country.

But the UAE has indicated that it is going to be proactive in maintaining foreign investment flows as it aims to raise the contribution of FDI to five per cent of the GDP over the next few years, the economy minister said in his opening remarks.

In line with this, Al Mansouri announced that the UAE is forming a law to regulate foreign investments that will allow 100 per cent of foreign ownership in some sectors. The legislation will aid innovation and technology transfer as it will mandate those firms with 100 per cent foreign ownership to support those sectors.

The new legislation, which will help the country to diversify further, is expected to come into effect by the end of this year, Abdulla Al Saleh, undersecretary, UAE Ministry of Economy, confirmed to Gulf Business at the sidelines of AIM.

Al Saleh, however, did not single out any certain sectors that this law will be applicable to.

In a wider trend, emerging markets continued to attract the bulk of foreign investment in 2014 as they netted 60 per cent of all global investment flows.

Sauvant said that the UAE attracted more than a quarter of total FDI flows to the region last year with Dubai seeing nearly $8 billion in FDIs.