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INWARD AND OUTWARD FDI IN WEST ASIA HIT RECORD HIGHS IN 2005

UNCTAD/PRESS/PR/2006/032
15 October 2006


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Foreign direct investment (FDI) flows in West Asia achieved record highs in both inward (US$34 billion) and outward (US$16 billion) directions in 2005 (figure 1), says UNCTAD´s World Investment Report 2006, FDI from Developing and Transition Economies: Implications for Development (1).

Strong economic growth, global oil demand and an improved investment environment played crucial roles in the historic surge of FDI inflows.

Oil-rich countries contributed to the growth in FDI outflows from the region and at the intra-regional level.

In 2005, FDI inflows to West Asia rose by 85% -- the highest growth rate in the developing world. They increased in 12 countries out of 14 in the region. The United Arab Emirates attracted the largest amount (US$12 billion), followed by Turkey (US$9.7 billion) and Saudi Arabia (US$4.6 billion). Those three economies accounted for over three quarters of the region´s inflows (figure 2). FDI is taking place increasingly at the intra-regional level, particularly in the services sector (for example, in telecommunications and finance), reaching US$14 billion in 2005 in cross-border mergers and acquisitions (M&As) alone, as compared to US$0.6 billion in 2004. The upward shift is partly the result of privatizations promoted in countries such as Bahrain, Jordan, Oman, Turkey and the United Arab Emirates. "Greenfield" Investments are mainly being undertaken in energy-related manufacturing industries.

In 2005, FDI outflows from West Asia more than doubled. Oil-rich Gulf countries are traditionally active in portfolio investments abroad. However, they are now allocating more petrodollars to FDI, and are investing widely not only at the intra-regional level but in developing Asia and Africa and in the developed world. Significant recipient industries include energy, tourism, and telecommunications. State-owned companies are active investors (table 1).

These trends partly reflect a progressively relaxed regulatory framework for FDI.. Most countries in the region have liberalized regulations, in particular for non-energy industries such as finance, real estate and telecommunications. These industries consequently attracted much of the region´s FDI in 2005. If there are continued efforts towards economic reform and further improvements to the business climate, supported by promising economic growth and high oil prices, further increases in FDI flows - both inward and outward - are likely. However, given continuing geopolitical uncertainty, these flows may be unevenly spread in the region.

The World Investment Report and its database are available online at http://www.unctad.org/wir and http://www.unctad.org/fdistatistics

ANNEX

Tables and figures

Figure 1. West Asia: FDI inflows and their share in gross fixed capital formation, 1995-2005

Figure 1. West Asia: FDI inflows and their share in gross fixed capital formation, 1995-2005
Source: UNCTAD, World Investment Report 2006

Figure 2. West Asia: FDI flows, top five economies,a 2004, 2005 (Billions of dollars)

Figure 2. West Asia: FDI flows, top five economies,a 2004, 2005 (Billions of dollars)
Source: UNCTAD, World Investment Report 2006

Note: a Ranked on the basis of the magnitude of 2005 FDI flows.

Table 1. West Asia: Big players in outward FDI from West Asia, 2005-June 2006

Table 1. West Asia: Big players in outward FDI from West Asia, 2005-June 2006
Source: UNCTAD, World Investment Report 2006




Endnotes

1. The World Investment Report 2006, FDI from Developing and Transition Economies: Implications for Development (WIR06) (Sales No. E.06.II.D.11, ISBN 92-1-112703-4) may be obtained from the United Nations sales offices at the addresses below, or from the United Nations sales agents in many countries. Price: US$80.00; for residents of developing countries: US$40.00. These prices include both the book and the CD-ROM. Customers who wish to buy the book or the CD-ROM separately or to obtain quotations for large quantities should contact the sales offices. Please send orders or enquiries for Europe, Africa and West Asia to United Nations Publication/Sales Section, Palais des Nations, CH-1211 Geneva 10, Switzerland, fax: +41 22 917 0027, e-mail: unpubli@un.org; and for the Americas and East Asia, to United Nations Publications, Two UN Plaza, DC2-853, New York, NY 10017, USA, tel: +1 212 963 8302 or +1 800 253 9646, fax: +1 212 963 3489, e-mail: publications@un.org . Internet: http://www.un.org/publications .





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