UNCTAD’s World Investment Report 2015 launched in Beirut
NNA – Foreign direct investment (FDI) into West Asia maintained its downward trend in 2014 for the sixth consecutive year, decreasing by 4 per cent to $43 billion, according to the World Investment Report 2015, launched this morning in a press conference organized by UNIC-Beirut. The Report is published yearly by the UN Conference on Trade and Development (UNCTAD).
The conference featured interventions by UN-ESCWA Director of the Economic Development and Integration Division (EDID), Mr. Mohamed El Moctar Mohamed El Hacene, who presented the major findings of the World Investment Report at the global level, and Mr. Khaled Hussein, Economic Advisor at UN-ESCWA’s EDID, who focused on foreign direct investment (FDI) in the Western Asia region.
The Report revealed that the continuing decline in FDI inflows since 2009 stems from a succession of crises that have hit the region, the report says, including the global economic crisis and an eruption of political unrest leading to conflict in some countries. This has deterred FDI not only into countries directly affected but also into neighbouring countries and those across the region, the report says.
Turkey remained the largest FDI recipient where inflows maintained almost the same level as the previous year, registering a slight 2 per cent decrease to $12 billion. However, growth was uneven across different activities. Real estate acquisitions increased by 29 per cent and accounted for 25 per cent of total FDI flows in 2014. FDI to the manufacturing sector rebounded by 30 per cent to $3 billion after a steep fall in 2013. But flows into public utilities and financial services dropped by 44 and 55 per cent to $1 billion and $2 billion respectively. While investment flows into Jordan and Lebanon remained stable in 2014, deteriorating security in Iraq cut short a recent resurgence of FDI there.
The Report mentions that FDI remained sluggish even in the oil-rich Gulf Cooperation Council (GCC) countries, the region’s main FDI destination (61 per cent in 2009-2014). It was down by 4 percent to $22 billion in 2014, despite these states having been relatively unscathed by political unrest and enjoying robust economic growth in recent years. Flows into the United Arab Emirates and Saudi Arabia – the region’s second and third largest recipients – registered slight declines and remained about $10 billion and $8 billion respectively.
Outward FDI from West Asia declined by 6 per cent in 2014 driven mainly by divestment (negative intracompany loans) from Bahrain. Kuwait, which has been the region’s largest overseas investor, saw FDI decline by 21 per cent to $13 billion. Outward FDI from Turkey jumped by 89 per cent to $6.7 billion, driven mainly by equity outflows which rose by 61 per cent to $5 billion.
Among foreign contractors present in the GCC construction projects market, companies from the Republic of Korea including Daelim Industrial, Samsung Engineering, Hyundai E&C and Daewoo E&C have been predominant actors since 2009, displacing established competitors by bidding against traditional top-tier contractors.
The Report states that sharp fall in oil prices since 2014 is likely to have had a significant impact on the construction market in the GCC by directly affecting oil and gas projects, but also projects in other sectors through the impact of a fiscal squeeze on government spending. However, huge fiscal reserves will still allow further state spending, and priority will most likely be given to ongoing and strategic projects.