FDI inflows rose only slightly in Bahrain and fell in Kuwait and Oman in the GCC region during the period compared to the previous year, reported United Nations Conference on Trade & Development’s (UNCTAD) annual study of worldwide investment trade.
The document, “The World Investment Report 2009”, said the members of the Gulf Cooperation Council (GCC), including Qatar, have used their abundant oil wealth to launch massive projects in a variety of industries, such as refining, petrochemicals, electricity, water, telecommunications real estate, and tourism and leisure. In the process, their reliance on FDI has increased, not so much for its financial contribution, but for the technology, expertise and management it brings with it.
“The increase of FDI inflows to West Asia in 2008 was largely due to soaring flows to Saudi Arabia, which rose by 57 percent to $ 38bn. The petrochemical and refining industry in that country accounted for most of the growth inflows, which amounted to $ 12bn—a 57 percent increase over the previous year—and there was a fourfold rise in the real estate sector, where inflows totalled $ 7.9bn. Saudi Arabia attracted 42 percent of total inflows to the region, consolidating its position as the region’s top FDI recipient”, the UN report said.
In Turkey, the second largest recipient in the region, inflows declined by 17 percent to $ 18bn, after reaching an exceptionally high level in 2007 due to a number of cross-border merger & acquisition mega deals in the financial industry. Inflows fell by 3 percent in the UAE to $ 14bn, as the global financial crisis in the last quarter of 2008 began to hit Dubai’s tourism, real estate and banking sector.
The sharp fall in oil prices and the steadily worsening outlook for the world economy since the third quarter of 2008 have dampened the optimism that infused the region for the past six years. Countries are now facing the prospect of deficit on their fiscal and current accounts for the first time in over five years, and development projects across the region are being hit hard by the global credit crunch and the changing economic outlook.