UAE breaks foreign direct investment record as Saudi Arabia sees 59% dip

DUBAI — While Saudi Arabia’s foreign direct investment (FDI) inflow fell 59% last year to nearly $7.9 billion, the United Arab Emirates recorded its highest FDI inflow ever of nearly $23 billion in 2022, according to a United Nations report released on Wednesday. 

Israel and the UAE led the Middle East and North Africa (MENA) for the highest FDI inflow — the purchasing of assets in another country — and placed 15th and 16th globally, respectively, according to the United Nations Conference on Trade and Development's (UNCTAD) 2023 World Investment Report. 

Here are the top 10 MENA countries with the highest FDI inflows in 2022, according to UNCTAD: 

1. Israel - $27.76  billion 

2. UAE - $22.73 billion 

3. Turkey - $12.88 billion 

4. Egypt - $11.40 billion 

5. Saudi Arabia - $7.87 billion 

6. Oman - $3.72 billion 

7. Morocco - $2.14 billion 

8. Bahrain - $1.95 billion 

9. Iran - $1.50 billion 

10. Jordan - $1.37 billion 

For two years in a row, the United States and China held first and second spots on the list. The US received $285 billion in 2022 (falling more than $100 billion from 2021) and China receivied $189 billion in FDI inflows. Singapore rose one spot to third place in 2022 with $141 billion in FDI inflows, overtaking Hong Kong in fourth receiving $118 billion. 

In 15th place, Israel received about $28 billion in FDI inflows, while the UAE directly followed with about $23 billion, a 10% annual increase for the Gulf nation from 2021. 

The Prime Minister of the UAE and ruler of Dubai Sheikh Mohammed bin Rashid Al Maktoum, lauded the country’s economic record in a press statement on Wednesday. 

“The UAE has achieved the highest foreign direct investment inflows in its history in 2022, reaching AED 84 billion ($23 billion) despite a 12% decline in global FDI movement,” he said, according to the Emirates News Agency. 

Global income fell to $1.3 trillion, according to UNCTAD’s report. The decline was mainly due to lower volumes of financial flows and transactions in developed countries, it added. 

The drop in global FDI was due to multiple global crises, including the Russian invasion of Ukraine, high food and energy prices, and debt pressures. The result of rising interest rates and uncertain capital markets affected the financing of international projects and cross-border mergers and acquisitions in particular, the investment report stated. 

“High energy prices boosted revenues of companies in oil and gas, commodity trading and utilities, but this did not translate into higher overseas investment,” stated UNCTAD, conveying Saudi Arabia’s 59% drop in FDI inflows last year despite recently announcing voluntary cuts of 1 million barrels per day until August. 

For example, Chevron and Exxon (both from the United States) and Saudi Aramco (from Saudi Arabia) divested foreign assets while increasing domestic investment, according to the report. 

This did not mean that Saudi Arabia and countries facing a similar FDI decline didn’t make efforts to encourage foreign investment. Saudi Arabia revealed its first Special Integrated Logistics Zone last year, which offers investors 100% foreign ownership and a 50-year tax holiday. It also opened four special economic zones with an eye for foreign investment in April of this year across the kingdom. 

Egypt announced up to 55% tax exemption incentives for FDI-funded projects in major industries that are at least 50% financed by a foreign currency. 

Algeria implemented a law on free trade zones that forgives companies for certain taxes and levies to encourage foreign investment. 

The UNCTAD report also ranked the UAE as the fourth-largest recipient of greenfield investment projects — where a parent company creates a subsidiary in a different company — with a total of 997 projects, following the United States, the United Kingdom and India. 

These types of greenfield investment trends, up 15% in 2022 from the year before, have served as counterweights to the overall fall of FDI inflows last year that were expected to continue into 2023. UNCTAD reported that early indicators for Q1 2023 already present weak trends in international project finance and mergers and acquisitions.