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French Version

Foreign Direct Investment inflow to Mideast sees 51-percent rise

Investment in region represents only 7 percent of total Asian FDI

The Middle East saw a record increase in Foreign Direct Investment (FDI) inflows in 2004 although this surge in investments was still far lower than the entire Asian continent, according to the 2005 UNCTAD World Investment Report.

"FDI inflow to the Middle East (called South West Asia in the report) grew by 51 percent in 2004 compared to the previous year, reaching $9.8 billion. But this (inflows) represented 7 percent of total Asian FDI," said the UNCTAD Economic Affairs Officer Nicole Moussa.

Speaking at the launching of the report, Moussa said that Turkey and Saudi Arabia were by far the biggest recipients of FDI in the region with $2.7 billion and slightly less than $2 billion respectively. Turkey ranked 9th on the amount of FDI outflows (approximately $1 million).

Citing an example, Syria received $1.2 billion in FDI in 2004, an increase of 11.3 percent from the previous year. By comparison, Lebanon which receives barely more than a fifth of the amount invested in Syria ($2.9 million in 2004), witnessed a decrease of 19.6 percent in 2004 compared to 2003, according to the report.

Overall, the region lagged far behind the rest of the developing countries trend except for Africa "which stayed stables in terms of FDI flows" said Moussa.

She added that "because of high oil prices oil producing countries in the region had excessive liquidity soaked up in mergers and acquisitions as well as real-estate projects."

It was worth noting that the U.A.E.-based telecommunication company Etisalat was investing in Saudi Arabia.

Economy Minister Sami Haddad, who was present at the launching, said that the main strategic sectors in the Middle East were the petroleum industry, electricity and telecommunication as most of them are closed to foreign investors. "No wonder the region sill lags behind the rest of the world, said Haddad, adding that "only Egypt and Pakistan are starting to open up these sectors.

According to the report, there was a surge in FDI in developing countries which reverses the declining trend for the last three years. "Some 36 percent of all FDI went to developing countries in 2004" said Moussa, adding that seven of the 10 economies with the largest increases in FDI were developing or transition economies, while the ten largest declines were in developed countries.

Intense competitive pressures in many industries led Transnational Corporations (TNC) to invest in developing countries that have lower cost of production and which have research and development (R&D) capabilities in terms of skills and technologies, argued Moussa. She added that it is still time for "late comers to act fast and start being aware of the increasingly competitive climate that surrounds their economies.

Beirut 03-10-2005
Bechir Saade
The Daily Star

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