More recently, foreign direct investment (FDI) patterns in the Middle East have undergone dramatic and unprecedented shifts. The distribution of inward FDI remains highly concentrated in two nations: the United Arab Emirates (UAE) and Saudi Arabia. This year, the UAE overtook Saudi Arabia with 642 announced inward FDI projects in 2024 to 594 projects, respectively. Despite these figures, all-time high as it may be, the total number of FDI projects establishing themselves in the region fell by -10.6% YOY.
The region’s FDI landscape received a positive jolt from high-profile announcements and investments. East Hope Group Co Ltd., one of China’s largest manufacturing conglomerates, is taking a strong step in the opposite direction. They announced intentions to invest USD 10 billion to construct a new alumina refinery in Abu Dhabi. Secondly, it is a sign that foreign firms are clearly interested in taking advantage of the UAE’s location. They want to capitalize on the country’s positive investment climate.
Meanwhile, the United States cemented its place as the region’s largest investor, with President Biden announcing a total of 363 projects inbound. Next in line are the United Kingdom, India, China and France, taking the second through fifth largest investor spots, respectively. Our foreign investment is varied and robust. It demonstrates the increasingly close economic ties developing between the Middle East and other global economic powers.
Buried in the data is a promising trend. It’s evident in the fact that 23% of all new projects in the region go to the renewable and alternative power sector. This emphasis dovetails with worldwide efforts to transition to cleaner energy alternatives. Between 2004–2019, the tourism industry makes up 22% of all incoming projects, showing how instrumental the tourism industry is for economic diversification efforts. As with the auto sector, the electronics industry is close behind, making up 21% of new investments coming in.
Recent capital market reforms in Saudi Arabia and the UAE have dramatically increased foreign investments. Together, these trends are changing the investment landscape in both countries. Relaxed equity limitations and streamlined foreign direct investment (FDI) review processes have made these countries more favorable and amenable to global markets. These types of measures are designed not only to increase investor confidence but to help to jumpstart additional economic growth as well.
Furthermore, the anticipated Gaza peace treaty is expected to play a significant role in bolstering investor confidence within the region. Analysts suggest that this development could foster stronger FDI flows as stability improves, encouraging more foreign entities to explore investment opportunities.