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FDI and implementation key to success of strategies
July 21, 2018, 1:33 pm
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High-level meetings and strategy formulation that remain merely a paper exercise will not achieve sustainable development goals, says a new report by the United Nations Conference on Trade and Development (UNCTAD).

In its flagship annual publication, World Investment Report (WIR) that reviews global investment and new industrial policies, the UNCTAD notes that effective implementation of strategies is crucial to a country’s development and growth. “But this requires efficient and empowered institutions, built-in mechanisms for feedback and lessons learned, flexible and adaptive policy monitoring, and correction systems”, warned the UN body that aims to promote investment and enterprise for sustainable and inclusive growth around the world.

The WIR’s focus on the importance of institutional capacity building for effective formulation and implementation of policies is especially relevant to Kuwait, as it goes about unfurling its New Kuwait 2035 strategic development plan. Adopting new development strategies is only the first-step; having the right people, institutions and mechanisms, to monitor and provide feedback, as well as implement the polices in an efficient manner, are even more vital to the success of development strategies.

Authorities need to realize that speed and efficacious implementation of strategies are also critical in responding to challenges and seizing opportunities presented by globalization, and in attracting and retaining foreign direct investments (FDI) that are needed to spur sustainable development and growth. The inflow of FDI helps to build and upgrade infrastructure and industries, it connects to international markets and essentially drives innovation and competitiveness in the local market. But the volatility of global markets and rapid shift in flow of FDI, means that Kuwait needs to take effective decisions and then act on them rapidly and decisively.

The latest WIR 2018 publication reveals that Kuwait clearly missed the boat when it came to FDI inflows in 2017. The report finds that Kuwait was the least attractive destination among the Gulf Cooperation Council (GCC) states when it came to FDI flows in 2017, drawing in US$301 million — a fall of 28 percent from the $419 in 2016, and just a minuscule percentage of the $2.8 billion that it attracted in 2012. More troublingly, given that a significant chunk of outward investments are state-owned funds, the FDI outflows from Kuwait in 2017 nearly doubled from the $4.5 billion in 2016 to $8.1 billion last year. Despite planning, promising and encouraging others to invest more in the local economy, government money appears to be going in the other direction.

Interestingly, in the six-nation GCC bloc, with the exception of Kuwait and Saudi Arabia, the other four states increased their FDI inflows in 2017. The UAE attracted the highest FDI to the region with $10.4 billion, up 7.8 percent from the $9.6 billion in 2016. Oman followed with an investment flow of $1.9 billion — around 11 percent higher than the $1.7 billion it attracted in 2016. Qatar saw $986 million in FDI inflows against $774 million, an increase of 27.4 percent from a year earlier. Bahrain displayed the largest positive shift in FDI inflows in the region, going from $243 million in 2016 to $519 last year, representing more than a doubling in inflows.

Inflows of foreign investment to Saudi Arabia in 2017 stood at $1.4 billion, though this was the third highest inflow to the GCC, it was nevertheless a sheer drop of over 80 percent from the $7.5 billion that the Kingdom drew in 2016. Incidentally, the only two countries in GCC that displayed a fall in FDI inflows in 2017, also reported a fall in real GDP growth, with growth dropping to minus 0.7 percent in Saudi Arabia and to minus 2.9 percent in Kuwait last year. Though, in the case of Kuwait, the country’s Central Statistical Bureau later claimed that the real growth was 1 percent based on its estimation of inflation, the fact remains that real productivity growth in the country has been quite dismal for a while now.

The WIR 2018 points out that the recent changes in global oil prices, the efforts of oil-rich countries in GCC to promote economic diversification, and political and geopolitical uncertainties will continue to shape FDI inflows to the region in the years ahead. Higher oil prices since late 2016 have led to improved state revenues in many oil exporting countries, but it has also resulted in a watering-down of necessary economic reforms and a slack in implementing strategic investment policies, to the detriment of future economies of concerned countries.

In its overall global assessment of FDI flows, the WIR 2018 notes that in contrast to accelerated trade and GDP growth in 2017, international flow of investments tumbled to $1.43 trillion last year, a drop of nearly 24 percent from the $1.87 trillion in 2016. The FDI flows to developed and economies in transition fell the most, while those to developing economies remained stable at $671 billion, or 47 percent of total global FDI flows. Inward FDI flows to developed economies also fell sharply, dropping by 37 percent to $712 billion in 2017. In addition, FDI to transition economies declined by 27 percent to $47 billion, the second lowest level since 2005, reflecting geopolitical uncertainties and sluggish investment in natural resources.

Other highlights from the WIR 2018 are that flows to developing Asia, which includes China and India, remained stable at $476 billion, with the region regaining its position as the largest FDI recipient in the world. In the same period, FDI flows to Africa slid to $42 billion, a drop of 21 percent from 2016, with most of the FDI decline coming from large commodity exporting countries. 

 

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