UAE most preferred FDI destination

The UAE maintains its status as the most preferred investment destination among global investors despite a drop in its ranking, said a survey.

According to AT Kearney's 2010 FDI Confidence Index, investor confidence in the economies of the Middle East is higher than in past years.

The survey found that UAE is a more preferred FDI destination among Asian investors, ranked among the top ten destinations, but not among European and North American investors.

Among the top 15 investment destinations for the second consecutive survey, the UAE has developed a stable business environment and created investment opportunities that have drawn investor interest far beyond what the country's size suggests. For investors with existing or planed investments in the Middle East, the UAE is the fifth most attractive FDI market in the world, a testimony to the region's growth and a reward for the efforts of Dubai and Abu Dhabi to develop the country into an attractive foreign investment destination, the report said.

Though the UAE slips in this year's rankings, investors maintain confidence and see large potential for economic rebound in the long term.

Compared to Hong Kong, the UAE fares well, falling only three places while Hong Kong dropped nine.

Additionally, other Gulf states like Bahrain, Kuwait, Oman and Qatar improved this year, while South Africa fell out of the index as concerns about its fundamentals grow. Bahrain, Kuwait, Oman and Qatar have used their oil and gas wealth to diversify their economies and attract FDI into the services sector. This group rises to 15th this year, from 17th in 2007. Investors from the primary, heavy industry and financial services sectors see these states as a source of interest going forward.

FDI is important in GCC countries, not as much for its financial contribution as for the technology transfer and managerial expertise that it brings. "In light of the global recovery, the Middle East is to be fast to pick up on FDI and the SME sector is to be the fastest sector to respond positively. With the support of government initiatives, the SME sector will continue to strengthen and enhance the attractiveness of the Middle East to large international corporations – driving additional FDI into the entire region," said Dan Starta, Managing Director and partner, AT Kearney Middle East.

Bric remains attractive

Brazil, Russia, India and China (Bric) and other emerging countries with large consumer base remain attractive to foreign investors and rank highly in AT Kearney's 2010 FDI Confidence Index.

In Asia, investors are confident about China and India, the first and third ranked countries, respectively, but the more advanced economies, Japan and South Korea, both fall out of the Index for the first time since its inception in 1998.

Meanwhile, the developed world has benefited as investors seek cover during the worst recession since the Second World War. In particular, a flight to safety has drawn investors to the United States.