Growth opportunities for GCC FDI inflow according to new Oliver Wyman and World Government Summit report

13
Matthieu De Clercq, Partner Public Sector and Economic Development, Oliver Wyman

Dubai, United Arab Emirates: Countries across the GCC can   significantly increase foreign direct investment (FDI) inflows by applying different mechanisms and methodologies, according to a new report published by Oliver Wyman and the World Government Summit (WGS). 

Titled “De-risking the Investment Landscape: High-impact FDI Policies for the GCC”, the report details FDI fluctuations within the region and ways they can be addressed. The report comes as part of a series by the WGS that aims to enhance government activity in the post-pandemic recovery phase. 

Matthieu De Clercq, Partner Public Sector and Economic Development, Oliver Wyman, said: “Earlier this decade, worldwide economic trends paired with reduced investor appetite made it harder for GCC countries to garner investments from foreign countries. However, economic diversification in UAE ensured that FDI remained resilient even with low oil prices, which allowed for a higher inflow of FDI into the country. Soon after, Saudi Arabia began implementing policy reforms, which increased the country’s attractiveness. Still, COVID-19 has had unprecedented impacts, stalling much of the progress that has been in the works over the past few years.”  

 “With current uncertain events due to the onset of the pandemic and the recovery period to follow, GCC countries should prepare for a wide variety of scenarios to counter the social and economic impact of the pandemic. These include strong and strategically targeted policies aimed to enhance the long-term structural attractiveness of key economic sectors to foreign investors,” added De Clercq. 

Globally, countries use targeted policies to attract FDI. Some targeted policies proposed by Oliver Wyman and the WGS include providing fiscal incentives, implementing regulatory policies, and generating outreach among others. The potential benefits from attracting FDI into the GCC are diverse and include boosting human capital, providing technology transfer, and increasing private market competition in the GCC. 

The report indicates that UAE-based Dubai International Financial Centre (DIFC) is an example of a successful policy aimed at attracting FDI. The centre succeeded in registering assets worth more than $178 billion and 820 companies. DIFC is aiming to triple in size by 2024, which will continue to stimulate FDI. Another example is Khalifa Industrial Zone in Abu Dhabi (KIZAD), which resulted in attracting investments amounting to about $20 billion. 

Other regional initiatives include the formation of a dedicated Ministry of Investment in Saudi Arabia to attract FDI and permitting 100 percent foreign ownership of companies in most economic sectors in Oman as of 2020.

With the onset of the pandemic, there has been a significant decline in foreign direct investment globally, with a 42 percent decrease in 2020, valued at approximately $859 billion, which is down from $1.5 trillion in 2019. Still, the UAE remained strong and steadfast with FDI inflows to the UAE growing to 44.2 percent in 2020 to $19.88bn compared to 2019, according to a report by the Ministry of Economy.

“To fully realize the opportunities of foreign investment, GCC countries should tailor policies to attract FDI. This will allow each country to choose the appropriate policy mix that best suits its goals and circumstances,” concluded De Clercq. 

About Oliver Wyman:

Oliver Wyman is a global leader in management consulting. With offices in 60 cities across 29 countries, Oliver Wyman combines deep industry knowledge with specialized expertise in strategy, operations, risk management, and organization transformation. The firm has more than 5,000 professionals around the world who work with clients to optimize their business, improve their operations and risk profile, and accelerate their organizational performance to seize the most attractive opportunities. Oliver Wyman is a business of Marsh & McLennan Companies [NYSE: MMC]. For more information, visit www.oliverwyman.com. Follow Oliver Wyman on Twitter @OliverWyman.