GENEVA (ALETIHAD)

Greenfield foreign direct investment announcements (FDI) in the UAE increased 28% in 2023, the second highest after the United States, a report said on Wednesday.

Overall, global FDI increased over 3% to reach an estimated $1.37 trillion in 2023, defying expectations as recession fears early in the year receded and financial markets performed well.

Global FDI flows increased, but economic uncertainty and higher interest rates affected global investment. The headline increase was mainly due to higher values in a few European conduit economies. Excluding these conduits, global FDI flows were 18% lower, as per United Nations Conference on Trade and Development's (UNCTAD) Global Investment Trends Monitor.

Regional trends

In developed countries, FDI in the European Union jumped from negative $150 billion in 2022 to positive $141 billion because of large swings in Luxembourg and the Netherlands. Excluding those two countries, inflows to the rest of the EU were down 23%, with declines in several large recipients. Inflows in other developed countries also stagnated, with zero growth in North America.

FDI flows to developing countries fell by 9% to $841 billion, with declining or stagnating flows in most regions. FDI decreased by 12% in developing Asian countries and by 1% in Africa. It was stable in Latin America and the Caribbean, as Central America bucked the trend.

Trends by industry

Project numbers rose 16% in global value chain (GVC)-intensive sectors, especially in automotives, textiles, machinery, and electronics.

The number of newly announced greenfield projects in semiconductors fell by 10% (39% in value) after strong growth in 2022. The number of greenfield project announcements and international project finance deals in infrastructure industries (including transport, power, water, telecommunications) fell by 4% overall, largely driven by lower project finance in renewable energy.

New international project finance deals in the renewable energy sector fell by 17% in number and 10% in value, only marginally less than the overall project finance decline.

The decline in the number of new projects was the first since the Paris Agreement in 2015.

The number of international investment projects announced in developing countries in sectors relevant to the SDGs – including infrastructure, renewables, water and sanitation, food security, health and education – remained flat. The number of SDG-relevant international project finance deals declined by 27% (down 40% in value). The number of SDG-relevant greenfield projects rose by 12% (6% in value). Project numbers in food and agriculture rose marginally from low levels in 2022, while most other sectors registered a decline.