GCC FDI bulk with 'trio' 

(MENAFN - Khaleej Times) The GCC trio of Saudi Arabia, the UAE and Qatar received the bulk of foreign direct investments, or FDI, that flowed into the Middle East since 2003, a survey by Ernst & Young reveals.

"Since 2003 the majority of investment in the Middle East - 79 per cent of FDI projects, 62 per cent by value and 65 per cent of jobs created - has gone to the GCC. The bulk of this has gone to the GCC 'trio' of the UAE, Saudi Arabia and Qatar, with Egypt the highest-placed non-GCC country with 16 per cent of investments by value," the survey report said.

Launched to coincide with the Growing Beyond Summit 2012 in Qatar, Ernst & Young's inaugural Middle East Attractiveness Survey is a detailed analysis of how FDI into the region has evolved in the last decade.

"The 'trio' GCC members have managed to occupy a positive space in the minds of investors and attract a large portion of actual FDI. International investors see bigger internal markets, more accessible customers, a stable political environment, and better transport and logistics infrastructure as some of the most attractive features of these economies," said Phil Gandier, Ernst & Young Transaction Advisory Services managing partner for the Middle East and North Africa.

Saudi Arabia was the big regional winner in 2011 with 161 investments worth 14.7 billion establishing the kingdom as the largest recipient of FDI by value. Other markets that outperformed the previous year in 2011 included Bahrain, Iraq and Oman.

Although Western Europe and North America have historically brought the most projects by number to the Middle East, with 59 per cent of the total between 2003 and 2011, investment by value has become increasingly concentrated on intra-regional investment. Initial analysis of the 2012 data shows the number of projects originating from Middle East investors exceeding that from Western markets for the first time.

"This highlights the ongoing trend of intra-regional investment in the Middle East which has gained significant momentum in recent years. There is growing optimism among Middle Eastern companies in terms of tapping into the potential of their own region," said Gandier.

According to a ranking of FDI destinations by fDi Intelligence, the UAE attracted the highest number of foreign direct investment projects in the Middle East and Africa in 2011 with 328. Saudi Arabia got the highest capital investment, which grew 40 per cent in 2011 to just over 14 billion (Dh51.4 billion). However, this is still far below the 42 billion in capital investment recorded in Saudi Arabia in 2008.

Jay Nibbe, Ernst & Young Markets Area managing partner for Europe, Middle East, India and Africa, said the Middle East has many of the qualities that companies look for in an FDI destination: solid investment fundamentals, strong demographic trends and vast natural resources.

The survey shows the US, the UK and France were still among the top five with investors in 2011 with 180, 100 and 61 projects, respectively. India was also in the top five with 76 projects, an increase of 12 per cent from last year.

Early data from 2012 suggests that the GCC "trio" again attracted the most investment projects with the UAE leading Saudi Arabia in terms of project numbers and value. There was also a welcome return of investment into Egypt.

Despite traditionally being seen as a region famous for its vast natural resources, the GCC countries have used the surplus cash to diversify into other sectors.

The first half of 2012 continued to see increased diversity in the sectors attracting FDI in the Middle East. Retail and consumer products attracted over 20 per cent of projects in the first half of 2012 and - along with business services, real estate, hospitality and construction - became a top choice for investors. The retail sector is capitalizing on the region's rich and expanding consumer base.

Real estate has seen a revival in 2012 and attracted the most capital investment. Most regional governments are recognising their citizen's social infrastructure needs. In addition to massive outlays to respond to this - and the announcement of ambitious projects like the 2022 Fifa World Cup - the prospect for the infrastructure sector seems promising.

The business services sector is also becoming increasingly popular among investors and ranked second in terms of projects (16 per cent of the total) and third in terms of value. This sector draws strength from the presence of free trade zones.