The UAE has attracted in excess of $66 billion in foreign direct investment (FDI) over the past 10 years to emerge as the second-largest investment destination in the Arab world after Saudi Arabia, according to official data.
The bulk of the inflow was during 2003-2008, when the country's economy recorded one of its biggest leaps and the government pushed ahead with plans to liberalise the economy and allow foreign ownership of projects.
Another factor was that the UAE is tied to the largest number of investment and avoidance of double taxation agreements in the Arab region, according to the Kuwaiti-based Inter-Arab Investment Guarantee Corporation (IAIGC), one of the largest Arab League financial establishments.
Between 1998 and 2008, total FDI pumped into the UAE stood at about $66.2bn, accounting for nearly 19 per cent of the total FDI of about $348bn pumped into the region during that period. The report did not specify the investors but Japan, the United States, the European Union and other key economic partners have long dominated the UAE's economic and financial sector.
The investments were second to Saudi Arabia, which attracted around $88.3bn during that period, said IAIGC in its annual report.
Most of the FDI flow into the UAE has been recorded in the past five years, when it stood at about $4.25bn in 2003. It jumped to about $10bn in 2004, $10.9bn in 2005 and $12.8bn in 2006.
The investments climbed to about $13.2bn in 2007 and hit a record high of $13.7bn in 2008 despite a sharp slowdown in the second half of the year because of the global financial turbulence.
"I think FDI in the UAE will continue to grow in 2009 and the next years despite the global crisis," said an economist at an Abu Dhabi bank.
"This is because of the government's commitment to keep spending high, the opening of more sectors to foreign investors, introduction of new incentives and plans to issue a new FDI law allowing 100 per cent foreign ownership… another factor is that Abu Dhabi has set foreign investment as a priority in its 2030 strategy and is constructing more industrial areas for this purpose."
The report showed the UAE has signed a total 43 investment and avoidance of double taxation agreements, the largest number of such deals in the Arab world.
Tunisia came second with 39 agreements, followed by Kuwait and Egypt with 38 pacts each, Syria with 28 agreements and Qatar with 27 accords.
Egypt was ranked third in the Arab world in terms of FDI, which totalled about $43.3bn during 1998-2008.
It was followed by Lebanon with nearly $22.3bn and Algeria, which attracted $22.1bn.
Countries with low FDI include war-battered Somalia with about $254 million, Djibouti with $488m and Palestine with $651m.
Kuwait had the second-lowest FDI flow in the Arab world of about $411m despite its massive oil wealth and high economic growth during that period.
The report gave no reason for the low FDI in the emirate, which controls about 10 per cent of the world's total recoverable oil resources.
But experts attributed this to persistent political tensions and instability following the Iraqi invasion of the nearby emirate in 1990 and the ensuing two wars that resulted in the ejection of the Iraqi forces from Kuwait in 1991 and the overthrow of the regime of Saddam Hussein in 2003.
Economists said another factor for the high FDI in the UAE was that the country became the second-largest economy after Saudi Arabia in early 2000s and this allowed it to lure massive capital into construction and other sectors.
"At the end of 2008, the UAE had the second-largest stock of FDI in the Arab world after Saudi Arabia and this is mainly because its economy was large enough to absorb such capital," said George Abed, a senior adviser in the Washington-based Institute of International finance.
Global Arab Network
Nadim Kawach, business24-7