Dubai, already among the top cities in the world in terms of pulling in foreign direct investment (FDI), is currently working towards making itself more attractive to global investors, confident that its competitive energy prices and ‘aftercare’ for investors will maintain the momentum.
Speaking to Business Recorder, Kunal Sawhney, CEO of Australia-based equities research firm Kalkine Group, said FDI has seen a declining trend across the globe thanks to COVID-19, “but Dubai is still being considered one of the top global FDI locations of the future.”
He said this was due to the city’s open FDI policy that had supported it to attract huge investment even during the pandemic, when it continued welcoming business travel.
The city has also been making investments in smart infrastructure to become a diversified global hub, while its reinvestment projects have also been a major draw.
He went as far as to say the city is now being considered “the world’s safest and most stable investment destination.”
He explained that Dubai’s low cost of energy is a major attraction, in addition to its economic stability and a tax-free environment for foreign investors, and the fact that Dubai has not put any limit on repatriation of profits.
“This is something which would require to be continued,” he said, if it wants to continue its FDI success.
Another major factor that has attracted investors is the vast investment opportunity it offers in sectors like oil & gas, real estate, agriculture, and services, said Sawhney.
There are many existing opportunities for foreign investors, while many more are expected to emerge with the opening of sectors like retail, logistics and transport, he added.
“The initiative of Dubai to introduce and implement initiatives that could improve business confidence and their responsiveness to evolving business needs has been the major reason for foreign investors.
It will help them keep attracting FDI in the future as well,” he said.
In 2021, the emirate saw Dh15.9 billion ($4.3bn) in FDI from some 370 projects in the first nine months of 2021, with the UK, France and the US being among the top FDI source countries, followed by Saudi Arabia and India.
Although the 2021 figure was less than what was achieved in the previous two years, Dubai’s performance still managed to get it ranked third globally in terms of key metrics including attracting greenfield capital and projects, according to Financial Times’ fDi Markets. It was also in third place on its ‘Global Cities of the Future 2021/22’ chart.
The report noted Dubai has moved up three places since 2018/2019, and stated that “Dubai’s favourable tax rates, free zones and well-educated workforce have proven highly attractive to many businesses.”
Fadi Reyad, Market Analyst at CAPEX.com MENA, told Business Recorder that Dubai can cement its place as a top FDI spot “by launching big new initiatives regularly to lure major players in every field.”
He echoed Sawhney’s sentiments when he said Dubai “constantly announces new initiatives designed to spur growth and lure investments in various sectors, and is appreciated for its sound economic roadmap and its diversifying economy as well as the forward-thinking policies it puts in place.”
Another factor that has helped the city is its role in embracing the fast-growing crypto industry, through which it has managed to attract leading firms.
Moreover, he said Dubai has an attractive fiscal policy and a thriving talent pool which give investors confidence in success.
He said authorities have also improved residency rules to bring and retain top talent, referring to the announcement of new types of visas and a relaxation of some requirements.
The city’s FDI success is in part thanks to the Dubai Investment Development Agency (Dubai FDI), part of the city’s Department of Economic Development, which provides support to foreign businesses looking to invest in Dubai, helping them identify investment opportunities and introducing them to relevant government and private sector contacts.
One of its main focus areas is aftercare, which helps retain investors and foster re-investment.
Last month, Dubai FDI organised the global launch of a book called ‘Investment Aftercare Explained: A Guide for FDI Practitioners and Policymakers on How to Grow and Retain Investors’ which it said is the first FDI guide to systematically map the last step of a foreign investor’s journey.
The organisation noted that aftercare is a priority for Investment Promotion Agencies as they look to boost FDI reinvestments and accelerate economic recovery, especially after COVID-19. Fahad Al Gergawi, CEO of Dubai FDI, had earlier said: “We believe investor aftercare has been one of the central pillars that have sustained FDI flows into Dubai and helped the city improve on its leading position in global rankings.”
At the launch event, FDI advisor Carolina Arriagada Peters, one of the authors of the book, explained that “the FDI industry is now starting to look after established foreign investors as people look after their cars. Even if it is no longer that shiny, it still needs to be regularly cleaned and serviced in order for it to perform for a long time. Foreign investors also need to be looked after regularly.”
As for the UAE as a whole, its ranks first in the Arab world and 15th globally in Kearney’s 2022 FDI Confidence Index. The country is one of only four emerging markets on the 2022 index - along with Qatar, China, and Brazil.
FDI inflows to the UAE jumped 3.9 per cent to hit AED76 billion in 2021 and put the country on track to achieve a target of Dh550 billion by 2030 and Dh1 trillion in foreign investments by 2051.
This is despite the fact that it is was recently put on the Financial Action Task Force’s grey list of countries which are subject to increased monitoring and need to work on “strategic deficiencies in their regimes to counter money laundering, terrorist financing, and proliferation financing”.
Being on the grey list can take a toll on a country’s FDI but UAE officials have said they will strive to meet a list of requirements laid down by FATF, including increasing prosecutions and identifying sanctions evasion.
“The UAE takes its role in protecting the integrity of the global financial system extremely seriously,” the UAE’s Executive Office of Anti-Money Laundering and Countering the Financing of Terrorism said in a statement.
Syed Hassan Abbas, CEO - Conformity Compliance Solutions, told Business Recorder that “the commendable thing about UAE is the determination and discipline not just to create a framework of regulations but to have effective and strong implementation.”
“Sectors prone to financial abuse, such as real estate, precious metal traders etc have been brought under the umbrella of the federally managed anti-money laundering reporting system. Previously, only financial institutions had to report suspicious transactions.”
He said all these sectors are now required to have a comprehensive compliance framework which includes sanction screening, client risk assessment, transaction monitoring, business risk assessment and suspicious transaction reporting.
Copyright Business Recorder, 2022
Comments
Comments are closed.