UAE's Ministry of Investment to further boost foreign direct investment after record year

The UAE's move to form a Ministry of Investment this week is part of an orchestrated push by the country to boost foreign investment as it seeks to diversify its economy.

The new ministry will “support the UAE's business objectives” and has been given the task of proposing general investment policies in co-ordination with relevant authorities, the government said this week.

It will also prepare strategies, legislation, plans, projects and national programmes to promote the investment environment in the country.

“It's going to complement the [continued] efforts [by the country],” Dr Thani Al Zeyoudi, Minister of State for Foreign Trade, told The National on Wednesday.

“It’s going to have a huge focus on investments, a clear strategy and a three-year targeted sectoral approach", which will help boost investments, he added.

Mohammed Alsuwaidi, managing director and chief executive of Abu Dhabi-based investment and holding company ADQ, has been appointed as the country's Investment Minister.

“The aim of the new ministry is to develop the country's investment vision, stimulate the investment environment internally and continuously enhance the competitiveness of our procedures and legislation to ensure that the country remains a global destination for investment and a major player in the global investment movement,” Sheikh Mohammed bin Rashid, Prime Minister and Ruler of Dubai, wrote on Twitter on Monday.

The announcement came at a time when the UAE recorded its highest foreign direct investment inflow last year at $23 billion, up 10 per cent annually, according to the World Investment Report 2023 issued by the UN Conference on Trade and Development (Unctad) on Wednesday.

The country was ranked first in the Arab world and 16th globally in terms of FDI inflows – up from 22nd last year.

It received the fourth-largest number of greenfield projects at 997, an 84 per cent annual increase, the report said.

The UAE was ranked 15th globally in terms of FDI outflows that totalled $25 billion last year, an increase of about 9 per cent on the previous year, the Unctad report said.

“Inward investment into the UAE has [grown] every year since 2015, as structural reforms have made the country an attractive destination for foreign investors,” Dubai bank Emirates NBD said in a report.

The Unctad report also cited the UAE's comprehensive economic partnership agreements (Cepas) that are enhancing bilateral investments.

The UAE has signed Cepas with India, Cambodia, Georgia, Israel, Indonesia and Turkey, and is working towards signing 26 similar deals as it seeks to attract more investment and diversify its economy.

“Our target is to have access to 90 per cent of the global trade … but we're focusing now on the 26 [Cepas] and we really hope that we're going to achieve it in the five years,” Dr Al Zeyoudi said.

The UAE has also set an ambitious target to attract Dh550 billion ($150 billion) in foreign investment by 2031 and rank among the top 10 countries globally in terms of attracting FDI, as part of its diversification strategy.

“That is the ultimate goal … We are doing all our efforts to ensure that the ecosystem in the country is attractive for investors,” Dr Al Zeyoudi said.

“Our target is always to beat our numbers from the last year, so we'll do our best to ensure that our numbers this year are going to be much better,” he said, adding that the first-quarter data “looks very promising”.

The UAE has unveiled several initiatives and introduced a series of policies – from allowing 100 per cent foreign ownership of companies to more flexible visa programmes – to help attract more capital and talent to the country.

It unveiled the NextGen FDI programme in July last year, which seeks to speed up licensing, ramp up the issuance of bulk or golden visas, improve banking services and provide commercial and residential lease incentives for advanced technology companies seeking to relocate to the country.

It has set a target of approximately 300 digitally enabled companies and aims to attract skilled programmers, data scientists and technology engineers within the next three years.

Some of the companies that have signed up under the initiative and are expanding into the UAE include Odys Aviation, a US-based hybrid electric aircraft manufacturer, UK-based software development company Godel Technologies and food technology company Krush Brands.

Meanwhile, the country’s financial centres, including the Abu Dhabi Global Market and the Dubai International Financial Centre, are also attracting big global names.

Global investment bank Goldman Sachs has confirmed plans to open an office within the ADGM to expand its presence in the Mena region.

In April, Ray Dalio, the billionaire founder of Bridgewater Associates, the world's largest hedge fund, also said he was establishing a branch of his family office at the ADGM, as part of his expansion in the Middle East.

Investment firm Brevan Howard is also boosting its presence in the UAE, with plans to expand to 100 people in the country.

In May, Abu Dhabi announced plans for a tenfold expansion of the ADGM to make it one of the world’s largest financial districts.

On Thursday, US hedge fund Verition, which manages approximately $7.3 billion globally, said it plans to open an office in the DIFC as part of its global expansion. The company has been licensed by the Dubai Financial Services Authority to manage assets and conduct certain other financial services activities.

Meanwhile, the DIFC said last month that it would establish an artificial intelligence and Web3 centre with a goal of attracting more than 500 high-tech companies by 2028.

The Dubai AI & Web 3.0 Campus will be the largest cluster of such companies in the Mena region and is designed to bring in $300 million in funds and create more than 3,000 jobs in the next five years.

“The economic legislation and policies adopted by the UAE have played a prominent role in strengthening and building a top-tier investment and business ecosystem in line with international best practices," said Abdulla bin Touq, Minister of Economy.

"This proactive approach has facilitated a swift transition towards a new economic model centered around flexibility and innovation. Through collaborative national efforts, we are striving to achieve further growth and prosperity for the UAE economy, boost the country's development trajectory, and uphold its leading and competitive position at the regional and global levels.”

The new Ministry of Investment is also expected to boost the country’s venture investment landscape.

The UAE secured north of $150 million in venture investment across 30 deals in the first quarter of the year, according to start-up data platform Magnitt.

The country led the Mena region in terms of non-mega deal funding ($100 million-plus), the report said.

More than 60 per cent of the total funding in the UAE came from the top three rounds recorded by FinTech Tabby, dine-in payment disrupter Qlub and online marketplace Cofe.

“Over the past few years, the UAE has been focusing on diversifying its economy and focusing on more innovative non-oil sectors like information technology, real estate, agriculture, aviation, etc,” Magnitt said.

Other GCC countries are also putting efforts to diversify their economies away from hydrocarbons by attracting more investments and moving towards innovation and knowledge-driven sectors.

Saudi Arabia, as part of its Vision 2030 agenda, also created a Ministry of Investment in 2020, replacing the Saudi Arabian General Investment Authority, to boost FDI.

The kingdom attracted $7.9 billion in FDI inflows last year, according to the Unctad report.