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Abstract

FDI is important in building a sustainable and diversified knowledge-based UAE economy. The stock of FDI grew at an average annual growth rate of 49 per cent over the past decade reaching US$85.4 billion or nearly 25 per cent of GDP in 2011. FDI flows have not recovered from the global financial crises. Most FDI stock is concentrated in finance, construction and real estate. Recent greenfield FDI is concentrated in construction, while more than half of the top merger and acquisition deals took place in finance, transportation, communications and utilities. The list of top OECD home countries for FDI in the UAE included Chile, Denmark, Italy, Japan, Luxembourg, Switzerland, UK and the US. Though investment policy limits foreign investment and reduces competition, the UAE has undertaken reforms and contracted investment treaties that have encouraged investment. Efforts are under way to speed up the ratification of a new foreign investment law, which removes several of the current legal barriers to FDI and offers foreign investors similar rights to those of UAE nationals. The UAE has significant potential for improving FDI performance.