KUWAIT (WAM)

The UAE topped the list of Arab destinations for foreign direct investment (FDI) in 2025, attracting $48.2 billion, representing 40.4 percent of the total.

It also ranked first in the Arab world and 17th globally in Dhaman's 2025 Composite Investment Climate Index, improving by two places compared with the 2024 index.

According to UNCTAD estimates cited in Dhaman's annual report, FDI inflows to Arab countries fell 10 percent to $119.3 billion in 2025. More than 80 percent of total inflows were concentrated in three Arab countries, while the region's share of global FDI declined to 7.3 percent and its share of FDI to developing economies fell to 13.3 percent.

Dhaman revealed that the average Arab ranking remained stable at 102nd place globally in its composite index of investment climate components for 2025. This reflects the continued gap from the global average ranking of about 23 places, despite 13 Arab countries recording an improvement in their rankings within the index.

In its 41st Annual Investment Climate Report 2026, launched on Wednesday from its headquarters in Kuwait, the corporation recommended adopting integrated and flexible programmes to enhance the Arab investment environment.

TThese recommendations focus on four key areas - political and security; institutional, legislative, and procedural; economic; and the production - following a decline of 9 percent in the Capex of FDI projects in the Arab world, corresponding to $112 billion, due to geopolitical developments in 2025.

At the political and security levels, the corporation underscored the importance of intensifying peaceful efforts to resolve conflicts and strengthening regional coordination to combat terrorism, organised crime, and external interference. It also emphasised the need to modernise security systems, de-escalate civil unrest, and reinforce the rule of law.

The report recommended updating and simplifying investment and business laws to keep pace with developments transparently; the digitisation, automation and speed of procedures; the strengthening of governance and quality control systems; development of justice and law enforcement systems to protect investors and their rights through local legislation, international agreements, and advanced arbitration services; and the provision of insurance against political and commercial risks.

With respect to the economic environment, the institution stressed the adoption of policies to curb inflation and enhance currency stability, the reformation of the tax and customs systems, and the development of infrastructure and logistics.

It also called for the empowerment of the private sector and the diversification of economic resources through additional benefits and incentives to targeted sectors.

The report also emphasised the importance of developing human capital and bridging the skills gap through education and training, increased labour market flexibility, industrial and service land availability and accessibility, diversification and facilitatation of direct financing channels, and the activation of the role of banks and financial institutions.

It recommended the localision of knowledge, alongside additional research and development in the production and service sectors, and the development of local supply chains, intermediate inputs, and essential components.

The organisation called for several points to be considered, including learning from the experiences of countries that have successfully improved their investment environment and rankings in international indices through quick wins and technical and digital services enhancement.

The report also highlighted the ranking of Arab countries in the 2025 Composite Investment Climate Index, revealing that the GCC countries, Jordan, and Morocco led the Arab world. The UAE ranked first regionally and 17th globally, followed by Qatar in second place regionally and 38th globally, and Saudi Arabia in third place regionally and 40th globally.

Oman came in fourth regionally and 51st globally, followed by Kuwait in fifth place regionally and 52nd globally. Bahrain ranked sixth regionally and 57th globally, Jordan ranked seventh place regionally and 74th globally, and Morocco placed eighth regionally and 75th globally.

Tunisia and Egypt also achieved better rankings than the Arab average, placing 95th and 100th globally, respectively.

In contrast, 11 other Arab countries ranked near the bottom of the list, ranging from 104th to 158th globally.