Led by UAE, GCC poised for boom in foreign direct investment

Khaleej Times

20-07-2025

The outlook for foreign direct investment (FDI) in the GCC and broader Mena region is becoming increasingly optimistic despite ongoing geopolitical tensions and global economic uncertainties.
A series of new studies from Bloomberg, S&P Global Market Intelligence, and the United Nations Conference on Trade and Development (Unctad) highlights how the UAE and Saudi Arabia are emerging as global frontrunners in attracting foreign capital, positioning the region as a hub for international investors in search of resilience, innovation, and strategic diversification.
According to the Unctad World Investment Report 2025, the UAE surged to 10th place among the world's top FDI destinations in 2024, recording an inflow of $45.6 billion—an increase of nearly 49 per cent from $30.68 billion in 2023. The UAE accounted for 55.6 per cent of total FDI inflows into the Middle East, which collectively stood at $82.08 billion. Other major regional recipients included Saudi Arabia with $15.73 billion, Turkiye with $10.59 billion, and Oman with $8.68 billion.
The UAE's rise reflects its aggressive economic reforms, investor-friendly regulations, world-class infrastructure, and robust commitment to future-focused sectors like artificial intelligence (AI), renewable energy, and advanced manufacturing. As noted by Unctad, this trend cements the country's growing importance in global capital flows, outpacing many mature economies.
The Bloomberg Media's seventh Global FDI Outlook report, Rebalancing in Real Time, further underscores this shift. Based on a survey of 2,600 global executives — including 227 from Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, the UAE, Egypt, and Morocco — the study finds that the Mena region leads the world in FDI ambition, with 90 per cent of decision-makers expressing intent to expand internationally. This compares to a global average of 76 per cent. The average investment plan in the region was $239 million, well above the global average of $194 million.
FDI interest in the region is no longer solely driven by traditional sectors like oil and real estate. There is growing investor focus on cost efficiency, supply chain reliability, and emerging technologies. Compared to 2023, FDI project interest grew by 10 percentage points in manufacturing, four points in supply chains, and three points in new market expansion. The UAE and Saudi Arabia are investing heavily in AI, with 53 per cent of Mena-based respondents planning to allocate capital to the sector in the next one to three years—making it the top emerging area for investment.
Junaid Ansari, head of Investment Strategy and Research at Kamco Invest, said: 'The competition between the US and China to deepen investment linkages in Mena has opened a window of opportunity for the region. GCC countries, led by the UAE and Saudi Arabia, are skillfully leveraging this geopolitical dynamic to attract long-term, strategic capital.'
S&P's report has cautioned that after a decade of strong FDI growth across both GCC states and North Africa, 2025 may see a brief moderation due to investor caution over changing US trade policies, volatile oil prices, and the slower-than-expected pace of some GCC economic diversification plans. However, a weakening US dollar could play in the region's favour, reducing the cost of capital for European, Chinese, and Indian investors while enhancing the external competitiveness of GCC economies with currencies pegged to the dollar.
Mohamed Ali Omar, associate at S&P Global, said the current weakness of the dollar served as a competitive advantage for GCC nations. 'This dynamic, combined with proactive structural reforms, enhances the region's attractiveness even in a complex global environment.'
The conflict in the Middle East, cybersecurity threats, and increased trade barriers remain top concerns for investors, particularly in the wake of recent geopolitical developments and tariff hikes by the US. Despite these challenges, the region is maintaining a pragmatic and resilient approach to growth, particularly through sustainability and ESG integration.
The Bloomberg report highlights that 69 per cent of Mena decision-makers have already integrated ESG criteria into their FDI strategies, compared to a global average of 56 per cent while 29 per cent plan to do so in the near future. This strong regional focus on sustainable investment is positioning the GCC not just as a financial hub, but also as a leader in green transformation.
The report also reveals that optimism in the Mena region is largely tied to the easing of US-China trade tensions, with 76 per cent of regional respondents citing this as the most encouraging global economic development. It's a sentiment that reflects growing confidence in the region's ability to navigate and benefit from shifting global alignments.
FDI experts believe that as the world reconfigures investment priorities in the post-pandemic, post-globalisation era, the GCC—particularly the UAE and Saudi Arabia—is emerging as a sought-after destination for FDI capital, driven by its strong macroeconomic fundamentals, forward-looking governance, and unwavering commitment to technological and sustainable advancement.