Qatar and UAE are still the most attractive countries for foreign direct investment (FDI) in the Gulf and wider Middle East and North Africa (MENA) region, a new report from Oxford Economics shows.
The favorable business environment and the quality of infrastructure of the UAE and Qatar played key roles in helping these countries to attain the top score. Oxford Economics’ scorecard examines the relative FDI attractiveness of MENA countries on the basis of the factors influencing business operability in a country and potential domestic and export market growth.
“The GCC overall spends 4-10 percent of GDP on infrastructure, which is comparable to spending by some Asian economies,” the report noted, adding as a result, the quality of infrastructure in the GCC is ranked relatively high.
In terms of the quality of the infrastructure, the report forecasted Qatar’s infrastructure spending to be 10.4 percent of the gross domestic product by 2025 against 7.2 percent in Oman, 6.3 percent in Saudi Arabia, 4.9 percent in Bahrain, 4.1 percent in the UAE and 2.5 percent in Kuwait.
The UAE’s infrastructure is on a par with Singapore, with Israel, Qatar, Oman, Turkey and Saudi Arabia not far behind, as per the World Bank’s Logistical Performance Index.
The GCC economies are likely to continue to invest in improving their infrastructure in line with their ambitious growth and diversification plans. The private-public partnership (PPP) market could help support infrastructure investment across the wider region, the report noted.
Dubai and Kuwait are probably the stand-out markets at present in the region, with PPP programs for roads and other infrastructure, but there is scope for other countries to also capitalize on PPP, Oxford Economics report said.
The scorecard reveals that the countries that have typically placed an emphasis on FDI, such as the UAE, Qatar and Bahrain stand in a good position competitively.
Stressing on the significance of FDI in the growth and diversification agendas across the MENA region and, in particular, in the GCC, the report said that several countries have set ambitious targets for FDI that see significant increases in investment inflow from the pre-COVID years.
The oil and gas sector will continue to attract FDI, however, the region needs to attract investment across broader sectors. Special economic zones and public investment is aimed at generating a positive cycle of economic diversification and greater FDI, according to Oxford Economics.