|World Bank finds weak foreign investment (Daily Star)|
|BEIRUT: Foreign Direct Investment flow to the Middle East and North Africa has been relatively modest in comparison to other emerging economies, a World Bank report said Thursday.
The report estimated the FDI in the Middle East and North Africa in the order of $2 billion to $3 billion annually.
“This modest scale of private capital flow has reduced the region’s exposure to sharp volatility and the associated financial crises,” the report said.
The Middle East and North Africa had the lowest investment returns on FDI in 2002, compared to other regions, which, compounded by the uncertainty over the war in Iraq and the Palestinian/Israeli conflict, eroded investor confidence and posed obstacles to sustained FDI flow, the report said.
“The region nevertheless does carry potential for larger private capital flows as indicated by the recent successful sovereign bonds issued by Qatar, Bahrain, Iraq and Egypt,” the report said, adding that these states have helped broaden the region’s investor base and have established benchmarks for the corporate sector, to tap the market with greater confidence.
Globally, although net FDI has slipped from the 1999 peak of $179 billion to $143 billion in 2002, it remains the dominant source of external financing for developing countries. Net portfolio flows were $9 billion, bringing total equity flows to more than $152 billion.
Workers’ remittances reached $80 billion in 2002, up from a total of around $60 billion in 1998.
The Middle East and North Africa region is an important source and a significant destination of workers remittances,” said the report.
It added that countries like Saudi Arabia, Kuwait, Oman and Bahrain have in recent years become important sources of remittances to other developing countries, and to other countries elsewhere in the region.
Countries receiving large remittances include Morocco ($3.3 billion), Egypt ($2.9 billion), Lebanon ($2.3 billion ), Jordan ($2 billion) and Yemen ($1.5 billion).
In 2002, the region received $14 billion in remittances, totaling 2.2 percent of the gross domestic product and ranking among the highest in the world.
“Migration and labor mobility are critical as unemployment is close to 20 percent and with youth unemployment rates close to twice the national averages,” said Mustafa Nabil, the World Bank Chief economist for the Middle East and North Africa. He added that the willingness of the region’s countries to continue to press forward with difficult reforms is always balanced by this concern for labor markets.
Beirut,04 07 2003
The Daily Star