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