FDI in the GCC Countries SAMA Quarterly Workshop 7 March 2016 - - PowerPoint PPT Presentation

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FDI in the GCC Countries SAMA Quarterly Workshop 7 March 2016 - - PowerPoint PPT Presentation

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FDI in the GCC Countries SAMA Quarterly Workshop 7 March 2016 Salah Alsayaary 1 Agenda: Concepts Global Trend GCC Trend Aggregate Country- Level Factors Affecting FDI in GCC Recommendations 2

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FDI in the GCC Countries SAMA Quarterly Workshop 7 March 2016

Salah Alsayaary

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Agenda:

  • Concepts
  • Global Trend
  • GCC Trend
  • Aggregate
  • Country- Level
  • Factors Affecting FDI in GCC
  • Recommendations
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Definition: The investment that is made by nonresident in another country while maintaining effective management control (at least 10 percent of the voting power according to the IMF). Types of FDI inward or outward Horizontal or Vertical Greenfield or Brownfield

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Benefits:

  • Technology and knowledge transfer.
  • Job creation
  • Improving labor force skills
  • Improves the countries’ infrastructures
  • Diversification of revenues (corporate tax)
  • Good effect on Balance-of-payments (BOP)

“FDI has beneficial impact but it may have a cost..” Costs :

  • Hindering domestic investment in some cases.
  • Adverse effects on the BOP
  • It may have Negative Influence on Exchange

Rates

  • Lower the comparative advantage of the country
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Global Trend

Global FDI flows jumped 36% in 2015 to an estimated US$1.7 trillion (UNCTAD,

World Investment Report, 2015)

500 1000 1500 2000 2500 2010 2011 2012 2013 2014 2015 Source: WDI and UNCTAD

World’s FDI Net Flow ($ bill)

36%

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1% 2% 4% 19% 20% 21% 33% 0% 10% 20% 30% 40% Sub-Saharan Africa Middle East & North Africa South Asia Latin America & Caribbean North America Europe & Central Asia East Asia & Pacific Source: WDI

FDI Net Flow (2014)

384 163 136 90 68 65 59 56 45 44 100 200 300 400 500 United States Hong Kong SAR, China China Netherlands United Kingdom Singapore India Brazil Canada France Source: WDI

FDI inflow 2015 Top 10 Economies (bill. $)

69% 31% 1%

FDI Net Flow (2010-14)

High income Middle income Low income Source: WDI

Global Trend

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24.7 416.4 100 200 300 400 500 1995 2011 2012 2013 2014

Source: UNCTAD

FDI Stock in GCC Countries (Billion $)

Bahrain, 5% Kuwait, 4% Oman, 5% Qatar, 7% Saudi Arabia, 52% United Arab Emirates, 28%

FDI Stock in GCC Countries (% of total)

Source: UNCTAD

60 52 43 30 27 24 4.2 1.6 0.5 1 1.5 2 2.5 3 3.5 4 4.5 10 20 30 40 50 60 70 80 90 2008 2009 2010 2011 2012 2013

Net FDI flow to GCC Countries

GCC FDI ($ billion, LHS) Share of World FDI (%, RHS)

Source: UNCTAD

GCC Trend

  • 20

20 40 60 2010 2011 2012 2013 2014

Source: UNCTAD

Net FDI Flow to GCC Countries United Arab Emirates Kuwait Oman Qatar Bahrain Saudi Arabia

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22.4 4.4 1.7 5.3 1.4 11.2

  • 5

5 10 15 20 25 30 35 Bahrain Saudi Arabia Kuwait Oman Qatar UAE

Source: WDI

FDI inflow (% gross fixed capital formation)

2005-07 2012 2013 2014 8% 1% 26% 3% 12% 47% 27% 17% 61% 22% 39% 72% 26% 29% 56% 0% 10% 20% 30% 40% 50% 60% 70% 80% UAE Bahrain Saudi Arabia Kuwait Qatar

Source: the World Bank

Distribution of FDI by Sector (2013)

Non-Tradables Commercial Services Non-Oil Manufacturing Resources and Oil Manufacturing

GCC Trend

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15.9 16.8 17.8 18.8 14 15 16 17 18 19 20 2011 2012 2013 2014 source: UNCTAD

FDI Stock (Billion $)

781 891 989 958 200 400 600 800 1000 1200 2011 2012 2013 2014 Source: WDI

FDI Net Flow (Million $)

2.69 2.90 3.01 2.83 2.50 2.60 2.70 2.80 2.90 3.00 3.10 2011 2012 2013 2014 Source: WDI

FDI Net Flow (% GDP)

Bahrain

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15.2 18.1 16.1 15.4 13 14 15 16 17 18 19 2011 2012 2013 2014 Source: UNCTAD

FDI Stock (Billion $)

3259 2873 1434 486 500 1000 1500 2000 2500 3000 3500 2011 2012 2013 2014 Source: WDI

FDI Net Flow (Million $)

2.12 1.65 0.82 0.30 0.00 0.50 1.00 1.50 2.00 2.50 2011 2012 2013 2014 Source: WDI

FDI Net Flow (% GDP)

Kuwait

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15.9 16.9 18.5 19.7 5 10 15 20 25 2011 2012 2013 2014 Source: UNCTAD

FDI stock (billion $)

874 1040 1626 739 200 400 600 800 1000 1200 1400 1600 1800 2011 2012 2013 2014 Source: WDI

FDI Net Flow (Million $)

1.29 1.36 2.08 0.90 0.00 0.50 1.00 1.50 2.00 2.50 2011 2012 2013 2014 Source: WDI

FDI Net Flow (%GDP)

Oman

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31.5 30.9 29.9 31 29 29.5 30 30.5 31 31.5 32 2011 2012 2013 2014 Source: UNCTAD

FDI Stock (Billion $)

939 396

  • 840

1040

  • 1000
  • 500

500 1000 1500 2011 2012 2013 2014 Source: WDI

FDI Net Flow (Million $)

0.55 0.21

  • 0.42

0.50

  • 0.60
  • 0.40
  • 0.20

0.00 0.20 0.40 0.60 0.80 2011 2012 2013 2014 Sourse: WDI

FDI Net Flow (%GDP)

Qatar

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186.8 199 207.9 215.9 170 180 190 200 210 220 2011 2012 2013 2014 Source: UNCTAD

FDI Stock (Billion $)

16308 12182 8865 8012 2000 4000 6000 8000 10000 12000 14000 16000 18000 2011 2012 2013 2014 Source: WDI

FDI Net Flow (Million $)

2.44 1.66 1.19 1.07 0.00 0.50 1.00 1.50 2.00 2.50 3.00 2011 2012 2013 2014 Source: WDI

FDI Net Flow (% GDP)

Saudi Arabia

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85.4 95 105.5 115.6 20 40 60 80 100 120 140 2011 2012 2013 2014 Source: UNCTAD

FDI Stock (Billion $)

7679 9602 10488 10066 2000 4000 6000 8000 10000 12000 2011 2012 2013 2014 Source: WDI

FDI Net Flow (Million $)

2.20 2.57 2.71 2.52 0.00 0.50 1.00 1.50 2.00 2.50 3.00 2011 2012 2013 2014 Source: WDI

FDI Net Flow (% GDP)

UAE

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Factors Affecting FDI in GCC Countries

Natural Resources: Rent

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20 40 60 80 100 120

  • 10000

10000 20000 30000 40000 50000 60000 70000

Foreign direct investment, net inflows (million, current US$) (LHS) US $/ bbl (RHS)

Sources: WDI, OPEC

Factors Affecting FDI in GCC Countries

Natural Resources: Oil Prices

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20 40 60 80 100 120 140

  • 10000

10000 20000 30000 40000 50000 60000 70000 Foreign direct investment, net inflows (million, current US$) (LHS) Trade Weighted U.S. Dollar Index: Broad, Index January 1997=100, Monthly, Not Seasonally Adjusted (RHS)

Sources: FRED, WDI

Factors Affecting FDI in GCC Countries

Exchange Rates; Dollar Movement

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Factors Affecting FDI in GCC Countries Economic Growth

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  • 5.0
  • 4.0
  • 3.0
  • 2.0
  • 1.0

0.0 1.0 2.0 3.0 4.0 5.0

  • 10000

10000 20000 30000 40000 50000 60000 70000 Foreign direct investment, net inflows (million, current US$) (LHS) Average GDP Growth in the G-7 (RHS)

Source: WDI & IMF

Factors Affecting FDI in GCC Countries

Growth in Advanced Economies

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  • 10000

10000 20000 30000 40000 50000 60000 70000 80000 90000 FDI Net Flows to GCC Countries ($ million, LHS) FDI Net Flows to EM Countries ($ million, RHS)

source: WDI

Factors Affecting FDI in GCC Countries

FDI in major Emerging Economies

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Factors Affecting FDI in GCC Countries

Trade Openness

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  • 10

10 20 30 10 20 30 40 Foreign Direct Investment inflow (% GDP)

Source: WDI

The Relationship between FDI and Inflation

ARE BHR KWT OMN QAT SAU

1 2 3 4 5 2 3 4 5 Foreign Direct Investment inflow (% GDP)

Source: WDI

The Relationship between FDI and Inflation

Factors Affecting FDI in GCC Countries

Inflation

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  • 10

10 20 30 10 20 30 40 50 Foreign Direct Investment inflow (% GDP)

Source: WDI

The Relationship between FDI and Government Expenditure

BHR KWT OMN QAT SAU ARE

1 2 3 4 5 15 20 25 30 Foreign Direct Investment inflow (% GDP)

Source: WDI

The Relationship between FDI and Government Expenditure

Factors Affecting FDI in GCC Countries

Government Expenditures

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  • 5

5 10 15 .2 .4 .6 .8 1 Foreign Direct Investment inflow (% GDP)

Source: WDI & Polity IV project and Authors Calculation

The Relationship between FDI and Quality of Institutions

ARE BHR KWT OMN QAT SAU

1 2 3 4 5 .05 .1 .15 Foreign Direct Investment inflow (% GDP)

Source: WDI & Polity IV project and Authors Calculation

The Relationship between FDI and Quality of Institutions

Factors Affecting FDI in GCC Countries

Quality of Institutions

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Recommendations

  • It is important to learn from experiences when applying new policy

regarding FDI.

  • Countries should build their FDI strategy based on their needs and set

targets to be achieved by FDI promotion.

  • The focus should be on investments that provide added value and job

creation in the economy.

  • It is important to have updated data for all aspects of FDI on aggregate and

sectoral levels.

  • Provide more information about investment opportunities.