| EMBARGO The contents of this press release and the related Report must not be quoted or summarized in the print, broadcast or electronic media before 16 October 2007, 17:00 GMT (1PM New York, 19:00 Geneva, 22:30 New Delhi, 02:00 17 October Tokyo) |
Foreign direct investment (FDI) inflows to the 14 economies of West Asia surged by 44% in 2006 to an unprecedented US$60 billion (figure 1), UNCTAD´s annual survey of investment trends reports.
World Investment Report 2007: Transnational Corporations, Extractive Industries and Development(1) attributes the increase to the region´s strong economic growth and improved business climate and to high oil prices, which have been attracting increasing amounts of FDI to oil and gas and related industries.
Turkey, Saudi Arabia and the United Arab Emirates continued to be the major recipients of FDI in West Asia (figure 2), together accounting for almost four-fifths of total inflows to the region. A few large cross-border mergers and acquisitions (M&As) and the privatization of financial services made Turkey the largest recipient with inflows doubling to $20 billion in 2006. Saudi Arabia was the second largest FDI target, receiving $18 billion (an increase of 51% over 2005), followed by the United Arab Emirates, where inflows declined by 23%, to $8 billion.
Services remained the dominant sector for FDI in West Asia, a major proportion of which went to financial services as a result of the privatization and liberalization policies of a number of countries in the region. There were also several major deals in telecommunications in Jordan and Turkey. Efforts by Persian Gulf countries to diversify their production activities beyond oil-related activities succeeded in attracting greater FDI flows to the manufacturing sector.
FDI outflows from West Asia totalled $14 billion, an increase of 5% over the 2005 level. These targeted mainly oil and gas and related industries, telecommunications, tourism and financial services. The value of cross-border M&As by investors from West Asia increased by 78%, amounting to $32 billion, as a result of high oil prices and the current account surpluses of oil-producing countries. About two-thirds of those M&As were targeted at developed countries, in particular the United Kingdom (35% by value), Canada (11%) and the United States (9%). Accounting for 8% of the value of such M&As, Pakistan was also an important target nation. In host developing regions, investments in telecommunications (mainly in sub-Saharan African countries), real estate and leisure industries (within the region) were notable in 2006.
Kuwait accounted for more than half of the region´s total outward FDI, mainly in the telecommunications industry. About 67% of the total value of cross-border M&As involved firms from the United Arab Emirates, the second largest investor from West Asia. Other important sources of FDI were Bahrain, Turkey and Saudi Arabia (figure 3).
In light of the region´s high GDP growth and ongoing economic reforms, the upward trend in inward FDI to West Asia is likely to continue, the report contends. Outward FDI from the region is also likely to expand further as a result of high oil prices and hence an increasing pool of petrodollars for West Asian countries and firms to invest elsewhere.
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, 1995-2006
Source: UNCTAD, World Investment Report 2007
Figure 2. West Asia: FDI inflows, top 5 economies, 2005-2006a(Billions of dollars)
Source: UNCTAD, World Investment Report 2007
Note: a Ranked on the basis of the magnitude of the 2006 FDI inflows
Figure 3. West Asia: FDI outflows, top 5 economies, 2005-2006 a(Billions of dollars)
Source: UNCTAD, World Investment Report 2007
Note: a Ranked on the basis of the magnitude of the 2006 FDI outflows.
