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UN report underlines GCC performance in investment

A UN report has highlighted substantial increases in both inward and outward Foreign Direct Investment (FDI) in GCC nations during 2005. Inflows of FDI to the West Asia region, which includes the GCC, were not only the highest ever at $34 billion but also the highest in the developing world - up 85 percent on 2004, according to the World Investment Report 2006 which was released on Tuesday.

The Bahrain Economic Development Board, on behalf of the UN Conference on Trade and Development (UNCTAD), hosted the GCC launch of the investment report.

The report, published annually, looks at FDI from economies in development and transition and the implications this investment has on development.

The major drivers for the increase in inward FDI were strong economic growth, global oil demand and an improved investment environment in the region.

Oil-rich nations were also major contributors to the growth in FDI outflows, reaching a total value of $16 billion - up 50 percent on 2004 figures.

Bahrain had the fourth-highest volume of FDI outflows in the West Asia region in 2005, with more than $1billion being outwardly invested.

Only the UAE, Kuwait and Saudi Arabia recorded higher values of outward FDI, with Turkey ranked in fifth place. Each of these nations showed a year-on-year increase in outward FDI, in keeping with regional trends.

Bahrain's efforts to involve the private sector in the Hidd Power and Water Plant were singled out for mention in the UNCTAD report, with the privatization of retail sales of Bahrain's petroleum products and postal services also under consideration.

Increased levels of FDI have positive impacts on economies, reflecting increased transparency, stability, and creating a more dynamic and diverse workforce.

Growth in FDI, both inward and outward, is viewed by economists and investors as a marker for the "good health" of an economy, and provides a strong indicator of capacity for growth and development.

Of the Gulf states, the UAE and Saudi Arabia attracted the highest volume of inward investment - attracting $12 billion and $4.6billion respectively.

Along with Turkey, - which attracted $9.7 billion inward FDI - these three economies accounted for more than three quarters of all FDI inflow to the West Asia region.

The report also identified the trend for an increased volume of FDI at the intra-regional level (ie between nations in the area), particularly in service sector industries such as finance and telecoms.

Zakaria Hejres, deputy chief executive of the Bahrain Economic Development Board, said: "Foreign direct investment has long been recognized as an important channel of capital and technology flows from developed to developing countries ... Policymakers from all quarters of the globe are taking stock of these developments."

He was speaking to media, economists, businesspeople and government officials at the launch at the Ritz-Carlton Hotel.

He added: "The World Investment Report assesses the factors explaining the rise of FDI from developing and transition economies, maps the main players, examines the potential costs and benefits associated with this phenomenon, and discusses the role of national and international policymaking in enhancing development gains from the process."

The increase in outward FDI highlights the growing trend for using income from natural resources like oil and gas wealth to invest in and diversify regional economies.

Amman,10 24 2006
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