The flow of foreign direct investment into Arab states dropped 15.1 percent last year due to the ongoing impact of the global economic meltdown, a pan-Arab organization said on Tuesday. Total FDI in the 18 states dropped to $80.7 billion in 2009 from $95 billion the previous year, the Kuwait-based Arab Investment and Export Credit Guarantee Corp. said in its annual report. But the organization said the region's decline was the lowest among international economic blocs, citing an improving investment climate in most Arab nations. Saudi Arabia, the largest Arab economy, accounted for $35.5 billion of all FDI into Arab states in 2009, although it declined from $38.2 billion the previous year, the report said. Gas-rich Qatar was second with $8.7 billion, up from $6.7 billion the previous year. FDI in the United Arab Emirates plunged to $8.5 billion from $13.7 billion in 2008, the report said. Foreign investment in Egypt fell from $9.5 billion in 2008 to $6.7 billion last year, while it rose for Qatar, Lebanon, Sudan, Algeria, Iraq, Yemen and Kuwait. The report covered only 18 Arab countries as information on the remaining four states was not available. Meanwhile, Arab countries have sought the help of the World Bank to increase capital flow among them as part of accelerating post-crisis reforms designed to stimulate their economies, according to their main financial establishment. The Abu Dhabi-based Arab Monetary Fund (AMF) said it was working with the Washington-based World Bank on a mechanism to promote inter-Arab investment, buoyed by a steady rise in regional capital flow over the past few years despite the 2008 global fiscal distress. The mechanism involves the preparation of periodical reports on economic data and investment projects in Arab nations with the aim of identifying business opportunities and giving investors better access to regional markets. “These reports are part of an overall project being carried out by the AMF and the World Bank… it includes the creation of a regional mechanism for the settlement of balance of payments in the Arab countries with the aim of providing comprehensive information on inter-Arab capital and encouraging the movement of capital, goods and other exchanges within the region,” AMF Chairman Jassim Al Manai said in a statement published by the AMF website. The AMF, a regional IMF-style institution run by the Cairo-based Arab League, said the scheme was discussed again at the recent conference on Arab capital inflow held in Abu Dhabi by the AMF and the World Bank. Manai noted that there has been a steady rise in inter-Arab investment but added the flow could accelerate after those arrangements are enforced. “The remarkable thing in the capital flow into the Arab countries over the past years is that there has been a steady rise in inter-Arab investment,” Mana said. “Some Arab countries recorded an increase in capital inflow even after the global crisis and the main reason for this was the big increase in regional investment.” In a recent study, another key Arab League organization said the pick-up in regional investment was because many Arab investors were forced by the crisis to shun global markets and turn to home countries. “Another key factor was the improvement in investment laws and a push by most Arab countries to attract capital given their importance in economic growth in the absence of other major financial sources in some regional nations,” said the Kuwait-based Inter-Arab Investment Guarantee Corporation (IAIGC). It said the investment climate and infrastructure in most Arab countries had largely improved over the past few years, but added more work needs to be done. The report showed the bulk of the increase in foreign direct investment (FDI) flow into the region in 2008 was in inter-Arab investments, which leaped by nearly 64 percent. The growth in capital inflow boosted the share of Arab states in global FDI to 5.3 percent in 2008 from 3.9 percent in 2007 and only 0.4 percent in 2000. The sharp rise in inter-Arab investments was the main factor in the FDI growth in the region, as they jumped to $34 billion in 2008 from about $21 billion in 2007.
