UAE ranks 19th in FDI confidence index backed by strong investor sentiment

The UAE ranked 19th worldwide in the 2020 Kearney Foreign Direct Investment (FDI) Confidence Index, up two places from 2017, mirroring its positive investor sentiment based on the government’s commitment to economic diversification, innovation, infrastructure and ease of doing business.

Government policies in 2019 such as the introduction of 100 per cent foreign ownership in 13 sectors of the economy—including manufacturing, agriculture, and renewable energy, as well as strong activity in the technology sector following ride-hailing app Careem’s acquisition, have all contributed to making the country an attractive FDI destination.

“The UAE’s commitment to good governance, innovation, infrastructure and the business environment is now paying clear dividends in its foreign investment attractiveness. Investors clearly anticipate that these fundamentals combined with an extremely effective response to the crisis will enable the country to emerge strongly from the Covid-19 crisis. The UAE is also expected to benefit from the entry into force of the Africa Continental Free Trade Area (AfCFTA) through new trade opportunities with African countries, though Covid-19 has delayed the timeline for the agreement,” said Rudolph Lohmeyer, partner, National Transformations Institute, Kearney Middle East.

“The shift of the Dubai Expo 2021 is expected to fuel growth and stimulate foreign investment as the world emerges from the crisis,” he added.

Only three emerging markets – China, Brazil and the UAE – featured in the 2020 index. While China remains the highest-ranked emerging market on the list, it slipped to its lowest-ever rank in the history of the index.

Global Outlook
The US led the pack in this year’s confidence index, followed by Canada and Germany.

Business leaders were reasonably bullish of the global economy at the outset of the survey period, before the spread of the virus, while in the last two weeks of the survey, investor confidence predictably declined across the board – for developed, emerging, and frontier markets alike.

Between the first two and the last two weeks of the survey, scores for each of these categories of markets all fell 25-33 per cent.

“The pandemic and its subsequent economic shocks show just how quickly and profoundly the external operating environment can change,” says Paul A. Laudicina, founder of the FDI Confidence Index and Kearney’s Global Business Policy Council.

“Some markets will recover faster than others, and this likely explains why there appeared to be a return to the fundamentals – to large, more stable markets with more predictable political and regulatory structures. Developed markets will continue to do well this year, likely because they show strength in the factors that investors tend to prioritise, including an attractive investment environment and strong technological infrastructure.”

Erik Peterson, managing director of the Global Business Policy Council and co-author of the study adds: “Emerging and frontier markets will suffer much more at the hands of Covid-19. A confluence of factors is at play, including inadequate medical infrastructure, limited fiscal options, a significant debt overhang, and higher levels of poverty overall. Many of these countries struggle with limited fiscal space and economic flexibility as well as high exposure to exchange rate fluctuations, which are exacerbated by US-denominated debt levels.”