The UAE was ranked the second-largest market after the US for greenfield foreign direct investment in 2023, according to a UN report, as the country continues to boost business with its investor-friendly policies.

The Emirates made 1,323 greenfield FDI project announcements last year, up 33 per cent annually, said the UN Conference on Trade and Development in its 2024 World Investment Report released on Thursday.

The US had 2,152 greenfield FDI project announcements last year, while the UK (1,184), India (1,058) and Germany (1,036) round out the top 5.

The UAE gained two places in the ranking of top destinations for greenfield projects, after entering the top five in 2022.

Greenfield FDI involves a foreign entity establishing operations in another country by building new facilities from the ground up.

It drives economic growth by creating jobs and transferring technology and knowledge to the recipient country.

The UAE, the Arab world’s second-largest economy, attracted $30.7 billion worth of FDI inflows in 2023, compared with $22.7 billion in 2022, an annual growth of 35 per cent, the report said.

FDI outflows from the country stood at $22.3 billion, compared with $24.8 billion in 2022, it added.

The UAE has set an ambitious target to attract Dh550 billion ($150 billion) in foreign investment by 2031 and eventually reach Dh1 trillion by 2051.

It also seeks to rank among the top 10 countries globally in terms of attracting FDI as part of its economic diversification strategy.

Global companies are boosting their investments in the UAE and setting up offices amid new initiatives from the government, including 100 per cent foreign ownership of companies, reduced visa restrictions and incentives for small and medium enterprises.

The country had a record FDI of about $23 billion in 2022. Official figures for last year have yet to be released.

In July 2022, the UAE also unveiled the NextGen FDI programme, which seeks to speed up licensing, increase the issuance of bulk or golden visas, improve banking services and provide commercial and residential lease incentives for advanced technology companies seeking to relocate to the country.

The country’s comprehensive economic partnership agreements are also aimed at enhancing bilateral investments.

The UAE has signed Cepas with India, Cambodia, Georgia, Israel, Indonesia and Turkey, and plans to sign 26 deals in total, officials say.

The country also moved up on Kearney’s 2024 Foreign Direct Investment Confidence Index, jumping into eighth place, from 18th.

Global FDI fell by 2 per cent to $1.3 trillion last year amid an economic slowdown and rising geopolitical tension, the Unctad report said.

The decline in global FDI exceeds 10 per cent “when excluding the large swings in investment flows in a few European conduit economies”, the report said.

FDI flows to developing countries dropped by 7 per cent to $867 billion but the decrease varied significantly across regions, it said.

While greenfield project announcements in developing countries increased by more than 1,000, the distribution was uneven, with nearly half in South-East Asia and a quarter in West Asia, the report explained.

However, lacklustre financial flows to developing countries were not due to a lack of efforts to support and draw investment, according to Unctad.

In 2023, 86 per cent of the investment policy measures taken by developing countries were more favourable to investors.

In contrast, 57 per cent of measures in developed countries were less favourable, with restrictions such as FDI screening mechanisms increasingly used to address national security concerns, it said.

“Crises, protectionist policies and regional realignments are disrupting the world economy, fragmenting trade networks, regulatory environments and global supply chains,” the Unctad report said.

“This undermines the stability and predictability of global investment flows, creating both obstacles and isolated opportunities.”

Looking ahead, the report said “while prospects for 2024 remain challenging, modest growth remains possible because of easing financial conditions and investment-facilitation efforts in both national policies and international agreements”.