Foreign Direct Investment
According to the UNCTAD's World Investment Report 2021, the UAE saw its FDI inflows increase by 11% from USD 18 billion in 2019 to USD 20 billion in 2020, despite the outbreak of the Covid-19 pandemic. Over the same period, the stock of FDI reached USD 151 billion. Natural resource transactions drove investment in the country, primarily ADNOC's USD 10 billion sale of a 49% stake in its natural gas pipelines to a group of six investors including Global Infrastructure Partners (US), Brookfield Asset Management (Canada) and Singapore's sovereign wealth fund. In addition, around 53% of FDI in the Emirate of Dubai in the first half of 2020 was in medium and high-tech industries; and a key deal was in the pharmaceutical sector, with CCL Pharmaceuticals (Pakistan) acquiring a majority stake in StratHealth Pharma for an undisclosed sum. The bulk of FDI is concentrated in the sectors of trade, real estate, finance and insurance, manufacturing, mining and construction. The main investors are the United Kingdom, India, the United States, France and Saudi Arabia.
The strengths of the UAE include its political and economic stability, easy access to oil resources, low energy costs, a willingness to diversify the economy and a high purchasing power. The absence of direct business taxation (excluding banks, oil companies and telecommunications operators) and direct income taxation, of exchange controls and of any limitations on the repatriation of capital, as well as the existence of a strong and profitable banking sector, plus a large pool of expatriate labour are the country's undeniable assets.
In addition, the UAE further liberalised its FDI regime with the promulgation of the FDI Decree 2020, which further facilitated foreign investment by extending some of the free zone incentives to the wider economy. A decision of the Federal cabinet approved in 2020 allowed up to 100% foreign ownership for 122 economic activities across 13 industry sectors. The government also launched 50 economic initiatives aimed at making the country more competitive and attracting USD 150 billion into domestic projects by 2030. A slew of 40 laws covering trade, online security, copyright, residency, narcotics and other social issues was implemented, and government entities shifted to a four-and-a-half-day week (Oxford Business Group). From October 2021 to March 2022, Dubai hosts Dubai Expo 2020. On the other hand, the country’s main weaknesses are the small size of its domestic market, the dependence on imports and on the international financial situation, as well as on the hydrocarbon sector. The UAE ranked 16th out of 190 countries in the 2020 Doing Business report published by the World Bank, losing 5 positions in a year.
| Foreign Direct Investment | 2019 | 2020 | 2021 |
| FDI Inward Flow (million USD) | 17,875 | 19,884 | 20,667 |
| FDI Stock (million USD) | 131,012 | 150,896 | 171,563 |
| Number of Greenfield Investments* | 445 | 384 | 535 |
| Value of Greenfield Investments (million USD) | 13,557 | 8,698 | 7,066 |
Source: UNCTAD - Latest available data.
Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.
| Country Comparison For the Protection of Investors | United Arab Emirates | Middle East & North Africa | United States | Germany |
| Index of Transaction Transparency* | 10.0 | 6.4 | 7.0 | 5.0 |
| Index of Manager’s Responsibility** | 10.0 | 4.8 | 9.0 | 5.0 |
| Index of Shareholders’ Power*** | 4.0 | 4.7 | 9.0 | 5.0 |
Source: Doing Business - Latest available data.
Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.
