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Foreign Direct Investment. Mobilizing International Resources for Development in the ESCWA Region Riad Meddeb Division on Investment and Enterprise. I- FDI trends in ESCWA region II- FDI and development : Challenges for ESCWA countries . I. FDI TRENDS IN ESCWA REGION. ESCWA in Comparison.

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Foreign Direct Investment

Mobilizing International Resources for Development in the ESCWA Region

Riad Meddeb

Division on Investment and Enterprise


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I- FDI trends in ESCWA region

II- FDI and development : Challenges for ESCWA countries


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I

FDI TRENDS IN ESCWA REGION



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FDI Inflows

Source: UNCTAD, FDI/TNC database (www.unctad.org/fdistatistics/)


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Top Recipient Countries

Source: UNCTAD, FDI/TNC database (www.unctad.org/fdistatistics/)



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Distribution of FDI flows among ESCWA countries, by range, 2006

Source:TNC database (www.unctad.org/fdistatistics/)


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FDI Outflows 2006

Source: UNCTAD, FDI/TNC database (www.unctad.org/fdistatistics/)


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FDI Outflows 2006

Source: UNCTAD, World Investment Report 2007.



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Top Recipient Sectors 2006

  • Services remained the dominant sector for FDI in the region, a major proportion of which went to financial services.

  • There were also several large deals in telecommunications.

  • High oil prices have are attracting increasing FDI in oil and gas-related industries.

  • GCC countries with large surpluses are rapidly increasing expenditures on large infrastructure projects, which are also attracting more FDI.


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Diversifying Industries 2006

  • The Gulf countries seeking to diversify their production activities beyond oil-related activities have set up initiatives to attract FDI into the manufacturing sector.

  • One example is the establishment of Free Trade and Industrial Zones in the United Arab Emirates.

  • The largest of these zones is the Jebel Ali Free Zone in Dubai.


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Qualified Industrial Zones 2006

  • Jordan has taken a similar approach with its Qualified Industrial Zones (QIZ).

  • These zones are attracting investors to set up manufacturing plants to take advantage of Jordan's preferential trade agreements with the United States and Europe.


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FDI Potential and Performance 2006

Source: UNCTAD World Investment Report 2007


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II 2006

FDI AND DEVELOPMENT :

Challenge for ESCWA countries


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CHALLENGE 2006

The objectives and the challenge for ESCWA countries is not just to stimulate FDI fows, but private flows which lead to Development


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New Actors since 2002 2006

  • Foreign investment originating from developing countries has emerged as a new actor unforseen in the Monterrey Consensus.

  • Private equipty funds and sovereign funds from ESCWA(GCC) have become a essential source of FDI in recent years.

  • Cross-border M&As by investors from ESCWA countries with large current-account surpluses from high oil prices.

  • About two-thirds of cross-border M&As from the ESCWA region in 2006 targeted developed countries, especially the United Kingdom, Canada and the United States.


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South-to-South Investment within ESCWA region 2006

  • Investors from developing countries may have technologies and business models more adaptable to the economies of FDI recipients.

  • High oil prices are supporting high growth in oil-exporting countries and some Gulf governments are spending much more on infrastructure.

  • Most greenfield investments from ESCWA went to developing countries in South, East and South-East Asia.

  • Increase of ESCWA investment in Maghreb countries.

  • However, investments from one ESCWA country to another within the region is growing and needs to be encouraged.


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Domestic Private Sector 2006

  • Foreign direct investment provides capital for a country's economic development, if the right policies and investment environment is in place.

  • For example, FDI can effect technology and knowledge transfers to the domestic private sector.

  • Encouraging entrepreneurship, especially in Small and Medium-Sized Enterprises, are an important component for strengthening the local private sector.

  • In the right conditions, local companies can take advantage of these transfers to improve their international competitiveness.

  • Encouraging FDI requires the right domestic and international factors, including a transparent, stable and predictable operating environment.


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Encouraging Investment 2006

  • Evaluate domestic law and regulations for investor friendliness. In some areas, it may be possible to revise legal requirements to be more streamlined and enforceable.

  • Provide a stable and predictable investment environment through greater transparency and accountability in decision-making.

  • Develop a local supply of qualified labour by facilitating skills transfer and human-resource development from foreign companies investing in the host country.

  • Introducing competition to the domestic economy for more efficient sectors and local companies that can be internationally successful.


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Recent Investment-Friendly 2006

Policy Developments

  • Qatar

  • In telecommunications, Qatar's Supreme Council of Information and Communication Technology launched the licensing process for a second fixed-line phone operator.

  • The Government is reportedly considering a revision to the investment law to allow majority foreign participation in more sectors.

  • Syrian Arab Republic

  • Introduce new law providing equal treatment between domestic and foreign investors.

  • Create the Syrian Investment Authority to implement national investment policies and to handle certain procdures for foreign investors.


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United Arab Emirates 2006

The Government modified the Agencies Law so companies can break contract with nonperforming agents.

It is also preparing a law to open more economic sectors to foreign ownership.

  • Saudi Arabia

  • The Government will start permitting FDI in previously restricted sectors, such as mining, film distribution, air transport, wholesale and retail trade, etc.

  • It will also start granting multiple-entry visas for business people.

  • The Government will also establish industrial cluster zones to encourage industrial investment.


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Infrastructure 2006

  • For continued growth, ESCWA countries will need to meet the infrastructure demands of their economies.

  • The private sector can be deterred from taking on an entire infrastructure project due to the large capital investment and long project duration.

  • Public-private partnerships can combine the technical expertise and management of the private sector with the capital of the public sector.One challenge of public-private partnerships is the need for Governments to have the necessary level of project oversight.


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Strenthening the cooperation between UNCTAD and UNESCWA on Data Collection & Sharing

  • Data on FDI flows and the transactions of international corporations is important

  • Accurate and recent data help governments and organizations to formulate FDI policies to maximize development

  • Developing countries need help to augment their capacities in data collecting and analysis

  • FDI data can aid in efforts for good governance and transparency


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Challenges to FDI Growth Data Collection & Sharing

  • Security concerns and political uncertainties in certain parts of the ESCWA region will continue to affect investor confidence in these areas.

  • Trade barriers and domestic regulations remain as deterrents to increased FDI and deregulation is needed to accelerate FDI and economic growth.

  • Domestic workforces need the training and skills to increase economic efficiency and the rate of return for investors.

  • By developing a healthy and competitive private sector, more local companies are open to the transfer of new knowledge and business models from foreign investors.

  • A business environment favourable to entrepreneurship and innovation is needed to foster a strong, diversified private sector for the long term.


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Thank You Data Collection & SharingVisit our website www.unctad.org/WIR