Foreign Direct Investment Report: UAE Economic Development Analysis

This report provides a comprehensive analysis of Foreign Direct Investment (FDI), focusing on its significance and implications for the United Arab Emirates (UAE). It defines FDI and explains its importance for a country's economic development, highlighting the benefits such as increased investment, job creation, and improved standards of living. The report explores the motivations behind companies investing in a country, including risk reduction, access to new markets, and diversification. It identifies the top five sectors that attracted the most FDI in 2019 and offers recommendations for the UAE government to attract FDI in other sectors. The report also clarifies the concepts of positive and negative lists related to FDI and assesses their impact on FDI inflow to the UAE. The analysis includes a discussion on the role of Dubai as a major investment hub and the overall contribution of FDI to the UAE's economic growth. The report is based on the assignment brief which required a detailed report based on the videos provided, and answers the questions related to FDI, its importance, the reasons behind investment, top sectors, government strategies, and the impact of positive and negative lists.

Running head: FOREIGN DIRECT INVESTMENT
Foreign Direct Investment
Name of the Student
Name of the University
Author note

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Table of Contents
Introduction......................................................................................................................................2
Discussion........................................................................................................................................2
FDI...................................................................................................................................................2
Importance of FDI for a country......................................................................................................2
Reasons behind investing in a country by a company.....................................................................2
Top 5 sectors of 2019 in terms of FDI.............................................................................................3
Recommendations for the UAE government to attract FDI in other sectors...................................3
Positive and Negative list of FDI.....................................................................................................3
Impact of positive and negative list on FDI inflow to UAE............................................................4
Conclusion.......................................................................................................................................4
References........................................................................................................................................5

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Introduction
Foreign direct investment (FDI) is an important tool for economic development of a
country. It involves the investment by a company or individual into another country for the
business interest. One of the major country that attracts huge foreign investment into the region
is United Arab Emirates (U.ae, 2020).
Discussion
FDI
Foreign direct investment is a long term investment in a foreign country by a firm or
individual. There are different forms of the FDI into a country. FDI required when an investor set
up a foreign business operation (Anyanwu, 2017). In addition, when an investor acquires foreign
business assets from a foreign company, it also considered as the FDI. The investors mainly
prefer open markets for the FDI instead of closed market.
Importance of FDI for a country
The investments into the country by a company brings growth prospects for the country.
It enables best return with the least risk associated with the business. Moreover, it boosts the
growth of business and trade of the country. Thus, it creates potential employment benefits for
the country (Rojec & Knell, 2018). As a result, it improves the standard of living and purchasing
power of the people. Overall, it fosters economic growth and development of the country.
Reasons behind investing in a country by a company
The companies are interested in investing in a country for some key reasons. It benefits
the companies due to lower risk and higher return associated with the business. It enables the

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companies to invest freely without government intervention and enormous profits (Chilton,
Milner & Tingley, 2017). It helps to invest in best businesses around the world. Hence, it ensures
the diversification of the business of the companies outside the specific industry, country and
political system through FDI. The companies get benefitted from the diversification of the
business without inducing risk.
Top 5 sectors of 2019 in terms of FDI
In 2019, the top five sectors that attracted most of the FDI including retail and whole sale
trade, accommodation and food service, software publishers, administration and support services
and finance and insurance (Iamsiraroj, 2016). Here, the role of the biggest city of UAE, Dubai is
very crucial as it is a major investment hub of the country.
Recommendations for the UAE government to attract FDI in other sectors
The government took a major initiative towards FDI inflow to the country through
negative and positive lists. However, there exists some key challenges for the government such
as striking a balance between the sectors where FDI increased through positive list and the
sectors through which government will limit FDI on negative list. Therefore, it is suggested for
the government of UAE to take necessary measures in form of appropriate strategies and
institutional framework to attract FDI from other sectors as well (Al Hamdani, Lazarova & Di
Maria, 2017). The government of UAE required to implement some regulations in terms of
lowering limits on FDI from other sectors to attract more FDI into the region.
Positive and Negative list of FDI
In 2018, the government of UAE enacted a new law related to the FDI inflow to UAE.
There involve two lists called positive and negative list. The major sectors under the positive list

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include agriculture, education activities, art and entertainment, administrative and support
services, construction, hospitality and food services, healthcare, manufacturing, information and
communication, renewable energy, transport and storage, professional scientific and technical
activities, space. In these sectors the need for investment through local sponsorship or free zones
have changed and allowed to directly invest into these sectors through FDI (Mosteanu, 2019).
The negative list includes sectors such as insurance, banking and finance, petroleum related
exploration and production, certain recruitment activities, investigation, security and military,
pilgrimage and umrah services, fishing and related services, water and electricity provisions,
post, telecommunication and other audio, commercial agency, road and air transport, blood
banks, quarantines and venom/poison banks and medical retail. Over 51% of negative list entities
may seek for approval on FDI from the regulator or they have to opt for local sponsorship.
Impact of positive and negative list on FDI inflow to UAE
There was a huge impact of positive and negative list on FDI inflow to UAE.
Undoubtedly, the sectors from the positive list witness a considerable increase in FDI from other
countries around the world (Sbia & Alrousan, 2016). As a result, it brought various tangible
impacts in UAE through FDI inflow such as more local manufacturing businesses, revolution in
UAE as the country establishes itself as a regional manufacturing hub for the GCC, Indian
subcontinent and African markets and improved logistics and transport network.
Conclusion
FDI plays a significant role in economic development and growth of a country by
securing investment from other companies or individuals across the world (Mosteanu, 2019).
Furthermore, it is a major contributor for the development of the UAE.

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References
Al Hamdani, H., Lazarova, E., & Di Maria, C. (2017). FDI, Economic Performance and
Technological Spillover Effects: Evidence from UAE. Economic and Social
Development: Book of Proceedings, 531-544.
Anyanwu, J. C. (2017). Foreign direct investment. In Handbook of globalisation and
development. Edward Elgar Publishing.
Chilton, A. S., Milner, H. V., & Tingley, D. (2017). Reciprocity and public opposition to foreign
direct investment. British Journal of Political Science, 1-25.
Iamsiraroj, S. (2016). The foreign direct investment–economic growth nexus. International
Review of Economics & Finance, 42, 116-133.
Mosteanu, N. R. (2019). Intelligent Foreign Direct Investments to boost economic development–
UAE case study. The Business & Management Review, 10(2), 1-9.
Rojec, M., & Knell, M. (2018). Why is there a lack of evidence on knowledge spillovers from
foreign direct investment?. Journal of Economic Surveys, 32(3), 579-612.
Sbia, R., & Alrousan, S. (2016). Does financial development induce economic growth in UAE?
The role of capitalization and foreign direct investment. International Journal of
Economics and Financial Issues, 6(2), 703-710.
U.ae (2020). Home - The Official Portal of the UAE Government. U.ae. https://u.ae/en#/