Sezer Sherif, Founder and CEO of investment group Vector Capital , explores the increasing appeal of the UAE for investors.

Catastrophe And Opportunity

The investment landscape has, for the past year, been characterised by uncertainty. It does not take a degree in economics to recognise that global pandemics, and their associated social restrictions, do not cultivate a desire for reckless speculation or needless risk-taking. It is doubtless for this reason that, according to a recent report from the United Nations Conference on Trade and Development, global foreign direct investment (FDI) suffered a total collapse during the course of 2020. The fall of 42% took total FDI from $1.5 trillion in 2019 to approximately $859 billion.

Though the upsides to such catastrophes are neither numerous nor overt, these challenging economic waters provide something of a litmus test for prospective investors. According to James Zhan, director of UNCTAD’s investment division, “[i]nvestors are likely to remain cautious in committing capital to new overseas productive assets.” There is, however, a more rewarding outlet for this kind of caution. The trials occasioned by the pandemic can be understood as a simplifying force in a world of overseas investment that can – especially for first-time investors – feel difficult, complex, and inaccessible. Where does a new investor begin? Lengthy and time-consuming analyses of various countries’ suitability for investment can instead be whittled down, at least in terms of initial impressions, to a single, straightforward metric: how well have they performed in pandemic conditions?

The principle of gauging investment potential through pandemic-related data has been neatly exemplified in a recent Tweet published by the Vice President and Ruler of Dubai, Sheikh Mohammed bin Rashid. He wastes no time in signposting the favourable contrast between the aforementioned global FDI figures and those currently enjoyed by the UAE. As he notes, “[d]espite the UN’s estimates that global foreign direct investment flows decreased by 42% in 2020 over COVID-19, the UAE witnessed 44% growth in FDI flows in 2020.” This kind of stark contrast demonstrates that the ongoing economic crisis can point the way towards fruitful investment opportunities, including FDI mainstays such as real estate, retail trade, manufacturing, and mining, alongside exciting high potential sectors including aeronautical services, natural resources management, and renewable energies – especially through, per Santander, the country’s huge photovoltaic potential.

The Continued Rise Of The UAE

The UAE’s suitability for photovoltaics is unsurprising: it is a region doused with eternal sunshine which encompasses the natural beauty of its sand dunes and the opulent reaches of its skyscrapers alike.

Having spotted data that suggests that the UAE is an attractive region for investors and recognising the physical attractiveness which makes the region worth forming ties with, it is worth considering what economic qualities make the country so favourable. The UAE’s remarkable growth in FDI is reflected in the 2021 Kearney FDI Confidence Index, in which the region was promoted from 19th place in 2020 to 15th in 2021.

A recent report from PwC Middle East places recovery and growth first on its list of predicted economic themes for the UAE in 2021, noting that the country is likely to “return to economic growth on a real GDP basis.” In fact, since the publication of the above report, the International Monetary Fund (IMF) has considerably upgraded the UAE’s growth forecast for 2021 from 1.3% to 3.1%.

Of course, no region can provide iron-clad economic stability. Ongoing global moves towards decarbonisation, for example, may have troubling repercussions for oil-rich economies like that of the UAE. Moreover, as an article from the World Bank suggests, the UAE’s “large tourism industry” will, in line with that of most parts of the world, continue to be impacted by the pandemic.

A Confident Future

On the whole, however, investor confidence will be heightened by the UAE’s moves to capitalise upon its favourable position for prospective investors. June 1 2021 represents a notable landmark for the UAE as a hub of investment opportunity: this date sees the launch of an amended Commercial Companies Law which will, as Gulf Today reports, “make the UAE a more investment-friendly destination” by allowing companies to apply for business licences without requiring a UAE national to act as a 51% shareholder.

As Economy Minister Abdulla Bin Touq Al Marri has said, this move gives the UAE a “competitive edge”, allowing for the free flow of foreign direct investment and facilitating the movement of money in the region. Other recent measures to attract investment for the UAE include the ability for investors to receive 10-year visas and a path to full citizenship. The country is evidently committed to nurturing a spirit of free entrepreneurialism which can only strengthen its attractiveness for investors, while its offers of extended visits can only sweeten the deal for those interested in the UAE’s expansive shopping malls, growing upscale dining scene, and unique architecture.