Revealed: The countries leading the FDI surge into Dubai

The UK is driving a surge in foreign direct investment (FDI) into Dubai as the UAE continues to launch incentives to attract money and talent from overseas.

According to new data from Dubai Investment Development Agency (Dubai FDI), an agency of the Department of Economy and Tourism (DET), the UK was behind more than a quarter of the total FDI capital inflows in 2021.

Following the UK, the US contributed 18 percent of FDI capital inflows, France 13 percent, Germany 11 percent and India (6 percent). 

Raghu Mandagolathur, CEO of Marmore Mena Intelligence, a research subsidiary of Kuwait Financial Centre (Markaz), told AGBI: “The pandemic has underscored the importance of bilateral relations and trade, in this regard the UAE-UK Sovereign Investment Partnership can be pivotal for the two countries. The key sectors targeted in the partnership are technology, infrastructure, and energy transition, which are priority sectors for the digital and diversified economy that the UAE is targeting in the near future.”

As for FDI projects in 2021, the US maintained its lead among top FDI source countries with a 19 percent share of the total FDI projects, followed by the UK with 18 percent, India 13 percent, France 6 percent and Germany (5 percent).

Sami Fadlallah, economic researcher, Healy Consultants Group, told AGBI: “The UAE has benefited tremendously from their response and rebound from the pandemic. Reopening early and a fast vaccination effort made it one of few global destinations where businesses could operate relatively unhinged from the disruptions of lockdown measures. 

“The doubling down on attracting business, talent and tourists has seen the UAE not only recover, but surpass expectations for growth in 2021.

“Additionally, legislative changes have continued to open up the UAE to foreign investors. From more flexible visa options to improved foreign ownership rights, investors have felt more comfortable setting up operations in the Emirates. This has been paired with world class infrastructure, amenities and living standards that have been a key attraction for top talent.”

Dubai also achieved the top ranking in the world with a record number of 418 greenfield FDI projects, revealed Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, Crown Prince of Dubai and chairman of The Executive Council of Dubai. 

Greenfield FDI implies an expansion of the capital stock, directly generating new economic activity and jobs. 

Sheikh Hamdan said: “As the winds of change sweep the world, foreign investors continue to gravitate to Dubai because of the supportive platform it has created for companies of all sizes to innovate, develop future-oriented technologies and add value to the economy.”

According to the new figures, both FDI projects and FDI job creation witnessed a significant increase of 36 percent in 2021 compared to 2020, with an estimated 24,868 jobs in 2021.

Dubai FDI revealed significant growth in all key indicators compared to the previous year, where the estimated value of FDI capital flows into Dubai exceeded AED26 billion ($7 billion) from a total of 618 announced FDI projects in 2021, a growth rate of 5.5 percent compared to 2020. 

Helal Al Marri, director general of the Department of Economy and Tourism in Dubai, said: “Dubai’s remarkable performance in FDI attraction in 2021 reflects the confidence of investors, multinational companies, startups and global talents in the investment and business environment in Dubai, notably the emirate’s success in overcoming the impact of the recent global health and economic challenges, while promoting economic growth and creating new opportunities in the future economy. 

“The remarkable success of Expo 2020 Dubai… and its enduring impact on facilitating varied trade and business partnerships, which are major drivers of economic recovery and growth globally, is a testament to our leadership’s commitment to make Dubai the preferred global destination to work, live, visit and invest.”

The FDI surge comes on the back of the largest legislative transformation in the history of the UAE, with over 50 laws in all fields updated and reformed, paving the way for the adoption of new policies and regulations that aim to further enable the economy in Dubai to keep pace with global developments and sustain its leading position in future.

Raghu added: “Impact of policy reforms is gradual as well as long-term and the increased foreign investments into the UAE are a result of these targeted government reforms. 

“Government stimulatory policies aimed at the private sector with special emphasis on the SMEs, introduction of special visa programs to target skilled labour and efforts to boost competitiveness and ease of doing business, are positive for the investment environment in the country. 

“The global investor confidence in the region was further boosted with the success of the Dubai Expo 2020, the benefits of which are set to be realised in 2022 and the years ahead.”

Al Marri said that Dubai attracted 43 headquarters FDI projects in 2021, leading regionally in this category and ranking second globally behind Singapore, surpassing major cities such as London and New York, in hosting global and regional headquarters of international companies. 

Fahad Al Gergawi, CEO, Dubai FDI, said: “Sustained FDI accomplishments and rankings despite the economic changes and challenges the world has witnessed in the past few years have demonstrated the strong fundamentals of the investment environment in Dubai. It will also accelerate the transition from bridging gaps and applying best practices to a new mindset of close cooperation with global investors and partnerships with FDI source countries.”

He added that Dubai has attracted a record share of the total greenfield FDI projects globally for the second year in a row. The share of greenfield FDI projects exceeded the 2 percent barrier for the first time in 2020 and reached a new high of 2.8 percent share in 2021.

According to Dubai FDI data, FDI projects recorded in 2021 mirrored Dubai’s diversified economy. Greenfield FDI into Dubai amounted to 53 percent of the total FDI projects, followed by new forms of investments (NFIs), accounting for 19 percent, and VC-backed FDI projects (12 percent). 

Technology FDI projects witnessed a significant growth, reaching 67 percent of the total FDI projects recorded in 2021, compared to 56 percent in 2020, further highlighting Dubai’s position as a global centre for specialised talent in the digital economy.