Today's Edition
ISIDORA CIRIC (ABU DHABI)
The UAE ranks first among emerging markets for investor optimism and second as a destination for foreign direct investment in the 2025 FDI Confidence Index, released last week. In a year where investor optimism has dimmed across much of the world, respondents pointed to the UAE's economic strength, regulatory environment and focus on innovation as core reasons for its appeal.
The annual index, compiled by Kearney, surveys executives from the world's largest companies on where they plan to invest in the next three years.
The overall ranking put the UAE in 9th place, ahead of Australia, Spain, Switzerland and South Korea – four high-income economies traditionally considered safer bets – and placed just behind economic heavyweights like Germany and Japan.
Aside from China, the UAE is the only emerging market to appear in the top 10 - and one of just two Middle Eastern countries to feature in this year's global rankings. It's also the second year in a row the UAE has secured a spot in the top 10. The country edged out Brazil, India and Mexico by a wide margin, consolidating its position as the most attractive destination for FDI in the Middle East and Africa.
Investor confidence in the UAE is also on the rise. The UAE scored a net optimism rating of 42%, up from 38% last year, making it the second most positively viewed economy on the list after the US. Among emerging markets, the UAE is the clear frontrunner, outscoring Saudi Arabia and China on investor optimism.
Economic performance is the UAE's strongest draw, with 38% of respondents singling it out as the top reason for investing, followed by ease of doing business (32%), technological innovation (31%), and infrastructure quality (23%). That combination puts the UAE in rare company, as only a few markets scored high across all four dimensions.
Other strengths included natural resources (23%), a skilled labour pool (19%) and transparent governance with low levels of corruption (17%).
The country's macroeconomic outlook supports that sentiment. According to the report, "the UAE remains an economic leader" in the MENA region, with anticipated output growth of 4.8% in 2025 and 6.2% in 2026 – a factor that executives "value the most in the market."
The government's push towards large-scale infrastructure initiatives is adding to the momentum, with Etihad Rail highlighted as a key project to enhance logistics and improve regional connectivity.
While investors identified commodity volatility, geopolitical tensions and regulatory unpredictability as top global concerns, the UAE's policy stability continues to set it apart. Recent IMF analysis supports this, showing the UAE's tax reforms were structured in a way that avoided the economic fallout typically associated with such policy shifts.
The introduction of a federal corporate income tax (CIT) in 2023 marked a major shift in the UAE's fiscal policy, yet it was implemented without destabilising private sector growth, making it one of the first in the region to expand its tax base while keeping investor sentiment intact.
The IMF also found that earlier VAT reforms had minimal impact on firm performance, thanks to a functioning refund system and a well-communicated rollout. Low initial tax rates, exemptions for smaller businesses, and a phased approach helped the UAE avoid the regulatory friction that often follows such changes in other emerging markets.
More broadly, the report highlights a regional shift toward fiscal discipline and long-term planning, a direction that appears to be resonating with investors in the UAE, where stable economic management has become part of the investment case.
