Finance sector spurs 14% rise in foreign direct investment in Abu Dhabi

Foreign direct investment in Abu Dhabi grew 14 per cent last year, driven by increased financial sector spending, according to data from the Statistics Centre Abu Dhabi.

The amount reached Dh82.1 billion last year, up from Dh71.9bn in 2013.

Financial institutions increased their investments the most, with capital spending rising to Dh13.5bn from Dh10.1bn in 2013.

Real estate, at just under a third of all capital spending from abroad, continued to account for the largest share of foreign investment in the emirate. Investors spent Dh24.9bn on Abu Dhabi’s housing sector, marginally more than the Dh23.6bn spent in 2013.

Foreign investment in manufacturing grew 9 per cent, attracting Dh14.2bn of capital last year, compared with Dh13bn in 2013.

Last year, foreign investment in new UAE projects grew 11 per cent, as 302 new projects were launched, according to an FDI Magazine report on greenfield investment published this year. Total greenfield foreign investment was about US$13bn, the report said.

Inbound foreign direct investment is, however, dwarfed by massive investments made by the country’s sovereign wealth funds.

The UAE continues to run net deficits on the financial account of its balance of payments, meaning that it invests more abroad than others invest in the country. It accounts for about half of all outbound foreign direct investment from the Middle East and Africa, according to FDI Magazine.

The country ran a deficit of Dh163.7bn on its financial account in 2013, the last year for which the UAE Central Bank reported data.

Large oil surpluses, and the country’s cash-rich sovereign wealth funds, allow the government to invest abroad as a buffer against changes in the oil price and the UAE’s economic health. These investments abroad considerably outweigh investments made by foreigners in the UAE.

This is also why foreign governments visit the UAE to attract investments from Abu Dhabi Investment Authority and Mubadala, which have combined assets under management of about $840bn, according to the Sovereign Wealth Fund Institute.

Last month, Dominic Jermey, the head of UK Trade and Investment, met officials from Abu Dhabi sovereign wealth funds in an attempt to solicit investments in British infrastructure projects.

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