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GCC: the Next International Investment Destination . Attracting International Investment – the UAE Experience. Mohamed Ali Alabbar Director General Department of Economic Development Government of Dubai May 4, 2004. The UAE: A Success Story. UAE GDP in 2003 US $79 billions

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attracting international investment the uae experience

GCC: the Next International Investment Destination

Attracting International Investment – the UAE Experience

Mohamed Ali Alabbar

Director General

Department of Economic Development

Government of Dubai

May 4, 2004

the uae a success story
The UAE: A Success Story
  • UAE GDP in 2003 US $79 billions
  • UAE ranked as top investment destination in the Arab world
  • One of the highest per capita incomes in the worldat nearly $19,000 in 2003 
  • Average annual growth in GDP of 6 per cent over ten years
a dynamic global economy
A dynamic global economy
  • Strategic re-export market
  • Blue chip MNCs use Free Zones as strategic access points for global markets
  • 16 commercial ports with capacity of 70 million tons
  • Among top five locations in the world for ship supplies and bunkering
  • Annual turnover in ship supplies of $300 million
  • Dubai’s trade in re-export rising on average by 14 per cent per annum
a blue chip destination
A blue chip destination

UAE is the destination of choice for many

business sectors

  • Information Technology
  • Banking and Financial
  • Shipping and transportation
  • Oil & Gas
  • Media

…and more

global endorsement
Global endorsement

“Good infrastructure and a business-friendly environment, particularly in the free trade zones, have made the UAE a very attractive place to invest for companies wishing to serve the growing markets of the Middle East, North Africa and Asia.”

Source: IMF Country Report-United Arab Emirates, Article IV Consultation

sound fundamentals
Sound fundamentals

“Executive Directors noted that the UAE’s open, market-oriented economic system, and the authorities’ sound economic management have helped sustain robust economic growth, low inflation and a comfortable external position, notwithstanding the wide fluctuations of global crude oil prices over the years.”

Source: IMF Article IV Consultation

huge potential
Huge potential
  • Third largest Arab economy after Saudi Arabia & Egypt
  • $8.2 billion private investment in industry and other productive sectors in 2003
  • Combined public and private investments - $17.4 billion in 2003 compared to $463 million in 1972
  • Reform process well underway with utilities privatization and corporatization
  • Liberalisation of most sectors especially telecom
  • WTO member since 1996
  • Dubai International Financial Centre set to repatriate billions of dollars of Arab funds
inward fdi performance index ratings
Inward FDI Performance Index Ratings

Source: UNCTAD (Index covers 140 economies)

fdi as of gross capital formation
FDI as % of Gross Capital Formation

Source: World Development Indicators from the World Bank

in sum
In Sum

The UAE and the rest of the Arab World have historically failed to capture their fair share of global FDI flows

we are not alone
We are not alone

Source: UNCTAD

the usual suspects
Limited liquidity of Arab Stock Markets

Small economies

Family based businesses not ready for transparency

Lack of integration of regional stock markets

Ineffective public enterprise reform and privatisation

Mismatch between labour skills and market needs

No database of skilled educated labor for recruitment

Political instability

Corruption

Inadequate reform of state and its institutions

Insufficient liberalization of trade, investment and prices

Unsatisfactory labour market reforms

The usual suspects
the international perspective
The international perspective
  • Conflict and regional instability 
  • Unpredictable macroeconomic conditions and public policy choices
  • Weak institutions and high administrative barriers  
  • Inadequate infrastructure  
  • Underdeveloped financial sector  
  • Inadequate availability of a skilled and flexible workforce

Sami Haddad, Director MENA Department

International Finance Corporation

what we need to increase the flows
What we need to increase the flows
  • Integration of regional financial markets
  • Improved quality of government
  • Elimination of red tape
  • Elimination of corruption
  • Enabling legal and regulatory environment
and provide the catalyst
And provide the catalyst
  • Employment growth needs to rise sharply
  • Raise labour productivity
  • Higher investment
  • Reforms to energise the private sector
  • Raise efficiency with which labour and capital are used
the action plan
The Action Plan
  • Develop clear investment promotion laws consistent with international best practice
  • Create single central agency responsible for FDI
  • Ensure sound regulatory framework to protect investor rights
  • Introduce reforms on company legislation
and a new philosophy
And a new philosophy
  • The promotion of entrepreneurship
  • The creation of new financial instruments
  • Supportive role of multilateral agencies
  • Extensive role of knowledge management
p romotion of entrepreneurship
Promotion of entrepreneurship
  • Government and Investment Promotion Agencies (IPAs) to market small businesses
    • as investment opportunities
    • in terms of their products
    • putting them in touch with sources of FDI
  • Business plan competitions
creating new financial instruments
Creating new financial instruments
  • Private equity instruments
  • Institutional support for such funds
  • Stronger regulatory and legislative support for new products
role of multilateral organisations
Role of multilateral organisations
  • Lend credibility to operations
  • Share expertise
  • Link financing to microeconomic financial fundamentals
  • Encourage good business practices
role of knowledge management
Role of knowledge management
  • Research and teaching of entrepreneurial economics and finance
  • Creating programmes that encourage new firm creation
  • Creation of regional training centres for small businesses
  • Equity funds to link loans to firms that participate in education programmes
  • Creation of institutions that leverage the region’s potential and create more competitive investment opportunities
future uae initiatives
Future UAE initiatives
  • Create a regional momentum for securing greater FDI inflows
  • Lead the way by addressing critical issues
  • Create a role model for the Arab world
finally
Finally…
  • “The message emerging from this survey is that countries are expected to intensify their efforts to attract FDI, reflecting increased competition worldwide for FDI projects….The general expectation is that countries will become more active in promoting FDI, in particular, through further liberalisation measures, additional incentives and increased targeting.”

UNCTAD – Corporate Location 2004

Worldwide survey of 87 international direct investment location