The WIR 2012 subtitled “Towards a New Generation of Investment Policies” was released in Manama on Thursday which shows the FDI to the West Asia region decreased by 16 per cent in 2011 to $49billion, affected both by continuing political instability and by the general deterioration of global economic prospects during the second half of 2011.
The report showed a 42 per cent fall in FDIs inflow to Saudi Arabia but remained the biggest recipient among the GCC peers Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates.
The MENA Centre for Investment will in cooperation with The United Nations Conference on Trade and Development (UNCTAD) released the WIR 2012 at a ceremony held at Sheraton Towers Hotel Bahrain.
This year’s report reviews investment policy measures taken in 2011, which show that most countries continue to liberalise and promote foreign investment. At the same time, a stronger regulatory role of governments is becoming apparent, with a growing share of FDI-related restrictions in total investment policy measures. The universe of international investment agreements (IIAs) continues to expand, with an increasing number of treaties showing innovative features.
“At a time of persistent crises and pressing social and environmental challenges, harnessing economic growth for sustainable and inclusive development is more important than ever. Investment is a primary driver of such growth. Mobilizing investment and ensuring that it contributes to sustainable development objectives is therefore a priority for all countries and for developing countries in particular,” the report said.
The share of GCC countries in the region’s total FDI inflows, the report added, decreased from 69 per cent in 2010 to 53 per cent in 2011.
“GCC countries are still suffering from the hangover of the days of leveraged financing characterized by large-scale domestic projects, some of which had to be put on hold or cancelled due to uncertainties stemming from the global financial crisis and from spreading political and social unrest in the region,” the report said.
“Unrest in the region also impacted on FDI flows to non-GCC Arab countries. Their incoming foreign investment declined by 26 per cent to $7 billion. Turkey registered a 76 per cent increase to $16 billion, mainly as the result of a more than threefold increase in cross-border merger and acquisition (M&A) sales,” the report noted.
“Foreign direct investment (FDI) to West Asia declined in 2011 for the third consecutive year,” the UNCTAD’s annual survey of investment trends, revealed.
“FDI outflows from West Asia rebounded by 54 per cent in 2011 after bottoming out at a five-year low in2010,” the report said.
“The strong rise in oil prices beginning at the end of 2010 increased the availability of funds for outward FDI from GCC countries. Turkey also registered significant growth, with outflows increasing by 68 per cent to $2.5 billion, due to the recovery of both cross-border M&A purchases and Greenfield FDI projects – that is, from-the-ground-up investments in new ventures.”
“FDI inflows will continue declining in 2012 – judging by preliminary data on cross-border M&A’s and green field investment for the first five months of 2012 – as uncertainties at the global and regional levels are causing foreign investors to remain cautious with their investment plans in the region,” the report warned.
But the report contend that the concentration of oil wealth in the region and the strategic need to reduce dependence on the oil and gas sectors through economic diversification there, are likely to create further business opportunities and bolster the region’s attractiveness for foreign investors over the longer term.