São Paulo – While foreign direct investment (FDI) in the countries of the Middle East is falling due to the crisis, on the other lane, the sovereign funds of the region should boost their participation as international investors. This information is included in the World Investment Report, an annual publication issued yesterday (17) by the United Nations Conference on Trade and Development (Unctad).
"The fall in global equity markets offers new investment opportunities for Sovereign Wealth Funds (SWFs) and other government-controlled entities. Indeed, some funds, such as those controlled by the Government of Abu Dhabi, have already begun to make foreign acquisitions in support of their national economic development objectives. This could contribute to an increase in FDI outflows from the region in 2009," says the Unctad.
If this forecast is confirmed there should be an inversion in the scenery registered in 2008, when investment originating in the countries of the Middle East dropped 30%, in comparison with the previous year, and totalled US$ 34 billion. According to the report, the performance was the result of a significant reduction in international acquisitions made by companies in the region. The crisis left local investors more " risk averse".
On the opposite lane, there was growth of 16% in investment received in 2008 in comparison with 2007. The value reached US$ 90 billion. According to the Unctad, the flow had great influence on funds attracted by Saudi Arabia, which received US$ 38 billion, growth of 57% over the previous year. This, according to the report, consolidated the country as the main destination for investment in the region, a position that the country had been disputing with Turkey in recent years.
Other nations in the Middle East that presented considerable growth were Qatar, with 43% expansion, where most investment was turned to the fields of liquefied natural gas, energy and water, Lebanon (32%), with investment mainly in the real estate area, and Syria (70%), as a result of the economic opening and improvement in the country’s situation in the area of international relations.
Still in 2008, there was slight growth in the investment flow to Bahrain, Iraq and to the Palestinian territories. In the case of Jordan, the inflow remained stable when compared to 2007, and there was reduction of investment in Turkey, the United Arab Emirates, Kuwait, Yemen and Oman.
This year, due to the crisis, according to the Unctad, there was cancellation or anticipation of projects in the area of oil, gas, industry and infrastructure, due to the lack of credit caused by the crisis. The lower investment forecasted in the region in 2009 ends a series of years of back-to-back growth. The report points out, however, that there is, in the Middle East, a tendency for adoption of policies for facilitation of foreign investment.
Change in the global scenery
With the crisis, that rapidly reached the central economies, there was in 2008 a change in the global investment scenery. Developing countries contributed with 43% of the investment last year, against just 27% in 2007.
Brazil, in turn, was, in 2008, the main receptor and issuer of direct investment in Latin America and the Caribbean, according to the study. The country attracted around US$ 45 billion and was the origin of US$ 20.5 billion. In comparison with 2007, there was growth of over 30% in inflow and almost threefold increase in the total invested abroad.
Under subtitle "Transnational Corporations, Agricultural Production and Development", the report emphasizes the foreign direct investment in the agricultural sector. The Unctad pointed out that the presence of this kind of fund in the operation is growing and may play an important role in the agricultural development of developing nations.
The study also points out that there are "indications" that there is being greater investment between developing countries in this area. Countries with high volumes of financial resources and low availability of fertile land have been investing in agricultural projects in other nations to guarantee their supply of food. This is the case, for example, with Saudi Arabia, the Emirates, Libya, Qatar, Kuwait and Bahrain, which have been investing funds mainly in African nations.
Recovery
In general, the report shows that the global FDI flow should drop from US$ 1.7 trillion in 2008 to US$ 1.2 trillion this year, with recovery to US$ 1.4 trillion in 2010 and only true growth in 2011, when it should reach US$ 1.8 trillion. The best result took place in 2007, when the flow was almost US$ 2 trillion.
Research developed by the Unctad with multinational companies shows that these companies believe in recovery of the FDI flow being boosted mainly by the United States, China, India, Brazil and Russia.
*Translated by Mark Ament
