Construction

GCC FDI flow droped 15.3% last year

Results “in spite” of improved economic conditions says IBQ

For the second consecutive year since the global financial crisis, foreign direct investment in the GCC fell in 2010 by 15.3%. It is the equivalent of US$ 39.8 billion, according to the International Bank of Qatar (IBQ).

The drop is blamed on “Lingering post-crisis investor caution coupled with the suspension or cancellation of a number of FDI mega projects in Saudi Arabia and Qatar”, according to the body.

FDI outflows from the GCC have also declined for the second year in succession, from $23.3 billion in 2009 to $10.5 billion in 2010, on the back of major divestments by GCC firms.

Kuwait in particular experience a “sizeable” drop in FDI due to what is described as an uncharacteristically high FDI flow in 2010 resulting from the recapitalisation of the Gulf Investment Corporation (GIC), which was worth $1.1 billion.

“Lingering caution by private investors in the wake of the financial crisis, constrained credit to the private sector, and the suspension, cancellation or completion of a number of mega-projects that had hitherto been responsible for sizeable investment flows, are cited as major contributing factors,” a report from the bank read.

Rebound in FDIs over the next year will depend upon oil prices, budget surpluses “regional events” and global economic performance, IBQ concluded.

 

Chart 2: GCC FDI inflows 2008-2010 ($ bn)

 

Chart 3: Ease of doing business rankings 2009-11

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