The state of play: FDI in the UAE

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The state of play: FDI in the UAE

07 Aug 2020

The government of the United Arab Emirates (UAE) will be hoping that its foreign direct investment (FDI) levels prove resilient to the headwinds of the Covid-19 pandemic, given the success of investment promotion initiatives in the country in recent years.

The UN Conference on Trade and Development’s 2020 World Investment Report showed the UAE as the largest recipient of FDI inflows in the west Asia region in 2019, with a total of $13.79bn.

Acquisitions of stakes in state-owned oil and gas assets in Abu Dhabi were major drivers of investment in 2019. US companies BlackRock and KKR Global Infrastructure acquired a 40% interest in the Abu Dhabi National Oil Company’s pipeline assets for $4bn, while a $3bn transaction saw Italy’s Eni acquire a 20% stake in Abu Dhabi Oil Refining Company.

Pre-pandemic, 2020 started strongly too, with Japan’s Marubeni announcing a $1.5bn investment to develop a 2.4GW combined-cycle gas turbine power plant in Fujairah, the company’s sixth power project in the UAE.

Covid challenges
In response to the challenge of Covid-19, an online portal was launched by the UAE’s Ministry of Economy that features advice for investors, updates on pandemic-related developments and analysis on how different investment sectors have been impacted.

The UAE signed bilateral investment treaties (BITs) with Gambia, Hong Kong and Brazil in 2019, taking its total signed BITs to 90, and also established the Abu Dhabi Investment Office to help increase FDI in the emirate.

In 2020 the government approved legislation allowing full foreign ownership in 122 economic activities across 13 industries, which could be a significant driver of investment in an economy historically dominated by state-owned companies.

Exemption to direct taxation of corporations, political stability, a strong financial sector and low energy costs are all advantageous for FDI, although the economy of the UAE is still largely dependent on hydrocarbons.

Source: Pharmaceutical Technology