UAE Attracts Global Investors with 28% Increase in Foreign Direct Investment Projects in 2023

The United Arab Emirates (UAE) maintained its global attractiveness in attracting new foreign investment projects during the past year 2023, with a 28% increase compared to the previous year 2022.

This represented the second highest increase in the number of new projects worldwide, following the United States of America’s lead.

According to the United Nations Conference on Trade and Development (UNCTAD), the United Arab Emirates (UAE) has led countries in the West Asia region in the growth of foreign direct investment (FDI) flows to the region.

FDI in West Asia increased by 2%, driven by the UAE’s international attractiveness, similar to other advanced countries, due to its advanced infrastructure, a legislative system that enhances FDI, and the best visa system globally.

Additionally, the UAE’s geographical location has made it a focal point for global trade, logistics, and energy services.

According to the report “Investment Trends for 2023” by UNCTAD, global foreign direct investment in 2023 was weak, with reduced flows to developing countries, stable new investment projects, and a decline in cross-border financing, mergers, and acquisitions.

Global foreign direct investment (FDI) flows reached approximately $1.37 trillion in 2023, showing a marginal increase (+3%) compared to 2022. This defied expectations and concerns of a recession, with FDI receding early in the previous year, amidst the strong performance of global financial markets.

Global investment flows were impacted by a state of uncertainty and rising interest rates on international investment. In advanced countries, foreign direct investment in the European Union jumped from negative $150 billion in 2022 to positive $141 billion due to significant fluctuations in Luxembourg and the Netherlands. Excluding these two countries, flows decreased by 23% to the rest of the European Union countries.

Foreign direct investment flows to developing countries declined by 9%, reaching $841 billion. Foreign direct investment also decreased by 12% in developing countries in Asia and by 1% in Africa. However, it remained stable in Latin America and the Caribbean region, with Central America defying this trend.

International project finance and cross-border merger and acquisition deals, including new projects primarily in the industry and infrastructure sector, faced challenges in 2023.

The main reason for this can be attributed to the increase in financing costs in 2023, along with a decrease in the number of deals by 21% and 16% respectively. Additionally, there was a 6% decrease in announcements for new projects.

However, their value increased by 6% and showed higher numbers in the manufacturing sector, which began to recover after a long-term downward trend.

The values of merger and acquisition operations were approximately 280 billion dollars lower than they were in 2022, and project financing deals decreased by 157 billion dollars. The values of the new projects announcements will impact the inflow of foreign direct investment for the year 2024.

In the United States, the largest recipient of foreign direct investment, the inflows of this investment decreased by 3% in 2023, along with a 2% decrease in the number of new projects and a 5% decrease in project financing deals. China also experienced a rare decline in foreign direct investment inflows (-6%), but it showed new growth in new project announcements (+8%).

The Association of Southeast Asian Nations (ASEAN), which is usually a driver of foreign direct investment (FDI) growth, recorded a 16% decline in FDI. However, the region remained attractive for investment in manufacturing industries, with a 37% increase in new project announcements. Vietnam, Thailand, Indonesia, Malaysia, the Philippines, and Cambodia experienced strong growth in this sector. India saw a decrease in FDI inflows (-47%), but remained stable in terms of new projects, making it one of the top 5 destinations for new projects worldwide.

Foreign direct investment (FDI) flows to Africa remained relatively stable at around $48 billion (-1%) and new projects on the continent increased. This is mainly attributed to strong growth in Morocco, Kenya, and Nigeria. However, project finance deals declined by a third, more than the global average decline, weakening prospects for infrastructure financing flows.

In Latin America, Brazil experienced a 22% decrease in foreign direct investment flows, with the number of new projects remaining steady, and international project funding saw a 40% decrease compared to 2022. Mexico, on the other hand, reported an increase in foreign direct investment, as well as an additional increase in new projects, further strengthening its position as one of the top beneficiaries worldwide.

According to UNCTAD data, the value of foreign direct investment flows into countries in the Western Asia region increased by 2% in 2023 to $51 billion, compared to $50 billion in 2022. Meanwhile, international merger and acquisition deals declined to $3 billion, compared to $37 billion.

In terms of the number of new projects, countries in the (West Asia) region attracted 2069 new projects, which is a 10% increase compared to 1878 new projects in 2022. The number of internationally funded projects also increased by 111% to 93 projects, compared to 44 projects.

The electricity and gas supply services sector saw 739 foreign direct investment transactions globally worth $322 billion. The electronics and electrical equipment sector had 1,282 projects worth $202 billion. The information and communication sector had 3,181 projects worth $115 billion.

The automotive and transportation sector had 901 projects worth $88 billion. The metals and products sector had 296 projects worth $87 billion.

The construction sector had 331 projects worth $64 billion. The transportation and storage sector had 1,213 projects worth $60 billion. The coal and fuel derivatives sector had 61 projects worth $59 billion. The chemical sector had 106 projects worth $58 billion.

The extractive industries sector had 106 projects worth $58 billion.

In terms of announced international project finance deals in 2023 according to sectors, the renewable energy activities amounted to $391 billion across 1161 projects, while industry and real estate accounted for $130 billion across 228 projects.

The energy sector received $97 billion across 157 projects, and housing, retail, and commerce received $50 billion across 133 projects.

The communications sector received $68 billion across 115 projects, while the oil and gas sector received $73 billion across 112 projects. Petrochemicals accounted for $57 billion across 75 projects, and infrastructure and transportation received $23 billion across 75 projects.

The mining sector received $52 billion across 60 projects, and waste and recycling projects accounted for $5 billion across 25 projects.