The UAE was ranked first in the Middle East region and jumped four places to 15th position globally in the latest Kearney’s 2021 Foreign Direct Investment (FDI) Confidence Index, as the country’s business environment demonstrates continued strengths in factors that are key to investors, including government incentives.
The country’s strong enabling environment, featuring advanced technological infrastructure and high innovation levels, is also central to its FDI attractiveness.
The UAE is one of only five countries globally that achieved a higher ranking this year in an increasingly competitive global FDI attraction environment.
The Kearney report found that investors are more cautious regarding FDI globally, as they gear up for a long-haul economic recovery.
The ranking reveals a significant dip in overall optimism about the global economy since pre- and early-Covid-19 pandemic levels last year.
However, investor optimism about the Middle East & North Africa (MENA) region remained stable.
Optimism levels regarding the economic outlook for the UAE scored higher in relative terms than those documented last year, placing it among the top five countries in terms of net optimism.
“The UAE’s striking rise in the rankings again this year speaks to the power of consistency and momentum. Specifically, the score is likely related to its continued investment in advanced technological infrastructure, high levels of innovation, and to the intensity and discipline of its response to the pandemic,” said Rudolph Lohmeyer, Partner, National Transformations Institute, Kearney Middle East.
“The UAE was among the first countries to approve a Covid-19 vaccine, and it has embarked on an extremely ambitious campaign to vaccinate its whole population by the end of 2021. Behind only Israel and Seychelles, the UAE has vaccinated the highest portion of their population (per 100 people), which can be expected to boost economic and investment prospects further.
“In addition, the UAE continued to engage beyond its borders this year – with the signing of the Abraham Accords on September 15 — signalling the UAE’s commitment to regional stability and economic integration. Expo 2020, which was postponed to October 2021, should further contribute to the resurgence in tourism, including from Israel, in the latter part of the year,” he said.
Paul Laudicina, founder and chairman emeritus of Kearney’s Global Business Policy Council, said a year into the pandemic and its severe disruption to the global economy, investors understandably appear chastened.
In last year’s survey, investors displayed a strong level of optimism about the global economy and their investment outlook, and many were caught flat-footed by the Covid-19 disruption that brought the world to an economic standstill.
Besides, the fall in confidence about the economy, most of the overall scores for the top-25 countries have fallen compared with previous years.
Only 57 per cent of investors are optimistic about the three-year global economic outlook, which is much lower than the corresponding figure last year of 72 per cent (prior to and at the onset of the pandemic).
Only three emerging markets are on this year’s Index: China, the UAE, and Brazil.
China remains the highest-ranked emerging market, a distinction the country has held consistently since 1999.
However, concern over escalating US-China trade tensions and a more general corporate rethink of international supply chains could explain its drop to 12th place.
“Beyond these findings, the biggest risk that international investors will continue to face will be the pandemic itself,” Peterson added.
“Overcoming Covid-19 will be key to global economic recovery and the improvement in FDI flows as the two go hand in hand. And economic growth in the near term will be determined in large part by the duration of the global pandemic, the effectiveness of fiscal and monetary responses, and the success of vaccination efforts,” he added.