Ernst & Young Area Managing Partner, Mark Otty addressing the opening session of the Growing Beyond Summit 2012 at Ritz-Carlton Doha yesterday. (Kammutty VP)
DOHA: The FDI flow to the Middle East is increasingly shifting from developed markets to intra-regional investments. Led by a trio of Qatar, Saudi Arabia and UAE, most of the Middle East’s FDI, both in terms of number of projects and value, originated from GCC in the last one decade, revealed Ernst & Young’s inaugural “Middle East Attractiveness Survey” released yesterday.
The report was launched at Ernst & Young’s ‘Growing Beyond Summit 2012’ here.
The report that combines annual FDI analysis since 2003 with a survey of 355 global and regional executives on their views about how and where investment across the Middle East will take place in the next decade, said regional attractiveness will improve over the next three years.
The region has seen the number of annual FDI projects increase from 362 in 2003 to a peak of 1,070 in 2008. Project numbers fell in 2009 and 2010 as the global and regional economies took a step backwards but recovered again in 2011 with an increase of 8 percent to 928. The value of the investments in 2011 remained low compared to 2008 but again showed a modest recovery on 2010. Initial findings for the first six months of 2012 demonstrated a similar picture with investment project numbers and value flat or below that of the comparable period in 2011.
Despite the size of the projects declining as investors take a more cautious approach to large- scale projects given the recent political challenges, the region still has many positives as the long-term investment outlook from executives confirmed.
Jay Nibbe, Ernst & Young Markets Area Managing Partner for Europe, Middle East, India and Africa (EMEIA) 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.”
Since 2003 the majority of investment in the Middle East – 79 percent of FDI projects, 62 percent by value and 65 percent of jobs created – has gone to the GCC. The bulk of this has gone to the GCC ‘trio’ of UAE, Saudi Arabia and Qatar, with Egypt the highest placed non-GCC country with 16 percent of investments by value.
Phil Gandier, Ernst & Young Transaction Advisory Services Managing Partner, Middle East and North Africa (MENA) said: “The ‘trio’ GCC members have managed to occupy a positive space in the minds of investors and attract a large portion of actual FDI”.
Saudi Arabia was the big regional winner in 2011 with 161 investments worth $14.7bn 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 percent 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.
However, the United States, the UK and France were still amongst the top five investors in 2011 with 180, 100 and 61 projects respectively. India was also in the top five with 76 projects, an increase of 12 percent from last year.
Early data from 2012 suggests that the GCC “trio” again attracted the most investment projects with UAE leading Saudi Arabia in terms of project numbers and value. There was also a welcome return of investment into Egypt.
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 percent 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 capitalising 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 Peninsula
