The UAE ranked second globally in the number of greenfield FDI projects in 2023, with 1,280 projects, trailing only behind the United States, which led with 1,966 projects.

 

The number of greenfield FDI projects in the UAE surged by 36% y/y, taking the UAE up three places in the global ranking from fifth in 2022, said an Emirates NBD report. 

 

Dubai retained its position as the leading city in the number of greenfield FDI projects, surpassing Singapore and London, with 1,036 projects, marking a 32% increase y/y. Abu Dhabi ranked 6th globally with 172 projects, showing a substantial 74% increase y/y. 

 

Notably, Dubai accounted for approximately 81% of the total number of projects in the UAE.

 

Total FDI capital inflows into the UAE increased by 33% y/y to $15.08 billion. Among the emirates, Dubai attracted the largest share of FDI capital inflows, amounting to $6.81 billion. Despite only having 13% of the total number of projects in UAE, Abu Dhabi accounted for a significant share of the total FDI capital inflows with $4.48 billionn. 

 

Abu Dhabi had the biggest number of projects that exceeded the $200 million-mark with eight projects while Dubai had five. Sharjah

followed in third place with $2.75 billion, with the bulk of the inflows coming from the India-based Infinite Mining & Energy investment in a new petroleum refinery in Hamriya Free Zone.

 

Greenfield FDI involves a foreign entity establishing operations in another country by building new facilities from the ground up. This makes greenfield investments the most significant type of FDI, as it drives economic growth by creating jobs, transferring technology and

knowledge to the recipient country, and improving competition. 

 

The estimated number of jobs created from greenfield FDI projects in the UAE increased by around 16% to 47,184 jobs last year.

 

Dubai leads in greenfield HQ Projects

Dubai also maintained its status as the leading hub for new greenfield headquarters projects with 60 projects in 2023, surpassing Singapore and London, which had 40 and 31, respectively. Riyadh was in fourth place with 22 new greenfield HQ projects last year.

 

Among countries, the UAE ranked third globally with 76 greenfield headquarters projects, trailing behind the United Kingdom and the United States, which had 86 and 164, respectively. Notable among these projects was the opening of a regional headquarters for the US based Odys-Aviation, a company specialising in hybrid electric vertical take-off and landing (VTOL) aircraft for regional

distances. The investment was facilitated by the Ministry of Economy’s NextGen FDI program.

 

US biggest source of greenfield FDI inflows

In 2023, the United States emerged as the primary source of greenfield FDI inflows into the UAE, which increased by over 137% y/y to $3.78 billion. India came in second with $3.21 billion, a significant increase of 413% y/y. The United Kingdom came in third with $1.19 billion, a 151% y/y increase. France followed with $1.1 billion, a slight decline of 7% y/y. China came in fifth with $935 million.

 

The UK led in the total number of greenfield FDI projects with 216 projects. The US came in second place with 207 projects. India

followed with 201 projects. France came in fourth with 58 projects and Italy came fifth with 46 projects.

 

Business services leads

The business services sector had the largest number of greenfield FDI projects in 2023 with 383 projects. Most of the projects were in the advertising and PR related sub-sector (66 projects) followed by employment services (59 projects), and professional, scientific, and

technical services (38 projects).

 

The software and IT services sector came in second with 269 projects. The majority of the projects were in software publishing and computer programming services that had 138 and 101 projects respectively.

 

The financial services sector followed in third with 131 projects. Within this, investment management, and corporate and investment banking were the major subsectors with 57 and 52 projects respectively. 

 

The industrial equipment sector came fourth with 81 projects. The real estate sector came fifth with 54 projects.

 

Hydrocarbons attracted the largest value of FDI. The coal, oil and gas sector attracted the most greenfield FDI capital flows at $2.6 billion, largely due to the investment from the Indian company Infinite Mining & Energy, which invested $2.5 billion to open a new petroleum refinery in the Hamriya Free Zone in Sharjah that will operate at a capacity of 10,000 barrels per day.

 

The project is the first significant investment into the coal, oil and gas sector since 2020.

 

Despite having the largest number of greenfield projects, the business services sector came in second with $1.84 billion in FDI inflows. The biggest investment into the sector was from the Saudi-based ACWA Power for an estimated cost of $914 million. ACWA Power will develop and operate the first phase of a seawater reverse osmosis plant at Hassyan in Dubai. The plant will have a capacity of 180mn imperial gallons per day.

 

The renewable energy sector followed in third place with $1.57 billion in FDI inflows. The biggest renewable project last year was a joint venture between Masdar and France based Electricite de France to build Abu Dhabi’s largest solar rooftop at Warner Bros. World in

Yas Island for an estimated $633 million. The project features the installation of 920 solar modules and is designed to offset 450 tonnes of CO2 emissions per year. Another significant renewable energy project is a partnership between UAE-based Averda and US-based

WasteFuel to build a commercial-scale municipal waste-to-renewable methanol plant in Jebel Ali, Dubai.

 

The plant will provide renewable fuel for the shipping industry. The estimated cost of the project is $414 million.

 

The automotive OEM sector came in fourth place with $1.5 billion in FDI inflows. American and Chinese companies were the biggest source of inflows into the sector with an estimated $640 million and $590 million, respectively. One of the major investments in the sector

was by the US-based Triton EV, an electric vehicle manufacturer, which is opening an assembly plant in the UAE this year at an estimated cost of $250 million.

 

Canadian companies also made significant investments into the sector. Canada-based AXL Electric Vehicles, a company that manufactures and sells electric vehicles, is also opening a manufacturing plant in the UAE. The plant will have an annual production capacity of 50,000

vehicles.

 

Strong focus on manufacturing

Manufacturing activities accounted for approximately 45% of the total FDI inflows, totaling $6.4 billion. That came ahead of headquarters that had investments to the value of $1.33 billion, recycling ($1.32 billionn), ICT and internet infrastructure ($1.18 billion), business

services ($1.04 billion), and logistics, distribution, and transportation ($1.03 billion).

 

The big investment in manufacturing aligns with UAE’s operation 300bn, which focuses on increasing the manufacturing sector’s contribution to GDP to AED300bn by 2031. These FDI inflows should also support the UAE in achieving its target of advanced technology exports worth AED15 billion and advanced technology GDP to the value of AED110 billion by 2031, the report said.

 

Strategic reforms fuel FDI ambitions

The remarkable growth in greenfield FDI in the UAE for 2023 can be attributed to a confluence of strategic regulatory reforms and ambitious trade agreements, the report said.

 

The introduction of regulatory reforms, including the allowance of 100% foreign ownership in specific sectors, enhanced intellectual property protections, and streamlined licensing procedures, has significantly bolstered the UAE's appeal to international investors.

 

These changes have not only facilitated ease of doing business but have also instilled confidence among foreign investors regarding the protection of their investments.

 

Moreover, the substantial increase in the value of goods exported from the UAE, which saw a 37% rise between 2019 and 2022, underscores the country's expanding role in global trade. This growth is further supported by the UAE's proactive approach in signing Comprehensive Economic Partnership Agreements (CEPAs) with several countries, including India, Cambodia, Israel, Indonesia,

and Turkey, while also engaging in ongoing negotiations with at least 16 other countries, it said. -TradeArabia News Service