Joe Hepworth, the Dubai-based Director, OCO Global, and Founder, The British Centres for Business (BCB), examines his crystal ball to predict 2021 trends for FDIs in the region against the backdrop of the ubiquitous though unwelcome Coronavirus that has dominated the world for all of 2020.
For all the challenges that currently exist in making predictions for the year ahead, I don’t envy those who were doing the same exercise a year ago, given what’s transpired since (much as they’d have been able to claim force majeure-unforeseeable circumstances that prevent someone from fulfilling a contract).
Based on where we are now, in the latter stages of the whole Covid-19 episode and with the signal advances in vaccination progress in November and December however, I do think that we can make some relatively confident calls on the year ahead in terms of the foreign direct investment and international trade landscape for the Middle East.
The first and most obvious thing to suggest is that it will be a good year, taken in isolation. The effect of Covid-19 in 2020 and the impact it has had on trade and investment (estimated to be down by 40% versus 2019) was such that even very modest growth would look good in relative terms.
As such, don’t be fooled by year-on-year figures. For anyone who’s reporting them in 2021, a more accurate benchmark would be 2019 or 2018 figures, but do expect a return to growth, albeit from a much lower base.
Surging UAE-Israel ties
The flurry of activity between the UAE and Israel that’s marked the last few months looks set to continue into 2021. It’s likely to change in nature however, with more substance replacing the initial excitement, as tangible deals start to be struck.
Based on the work we’ve been doing with Israeli companies, the main focus at this stage looks to be on establishing trade links–finding agents, distributors & commercial partners – ahead of potential inward FDI projects over the next few years once the market has been proven.
Should other GCC countries beyond Bahrain and the UAE also agree peace terms with Israel, a similar commercial dividend would be reaped across the whole region. The UAE would stand to benefit the most from this as it would bring its regional hub status into full play for Israeli companies, and this in turn would be a significant stimulus for inward investment from Israel.
Of course, geopolitics continues to have a massive impact on trade and investment, and the thawing of other regional relationships would have a similar impact, whilst we also wait to see how the new rulers of Kuwait and Oman will shape their respective national approaches post-Covid.
International politics also has a large influence and all eyes are on the new Biden administration in the USA to see how it will engage with the Middle East, and Iran in particular.
The China factor
The United States’ relationship with China is very likely to impact the region. As a result of Covid, we are already seeing multinational companies look at reshoring or near-shoring key supply chain nodes to reduce the reliance on China.
We see the Middle East as a likely winner from this pattern with its relative proximity to key demand markets in India, Africa and Europe. Add in the continued USA-China tensions – and we don’t expect a material thaw under President-elect Joe Biden in the short term – and the Middle East looks to play an important role as a ‘neutral’ region relatively unscathed by bilateral trade wars, which is obviously positive for trade and investment here.
The region also stands to benefit from continued disruption of the uncertainties around the Brexit trade deal, with UK companies in particular looking for benign regions to trade with. The recent raft of new laws announced in the UAE regarding both corporate legislation such as 100% ownership and more; social and liberal changes for expats, further enhances the UAE’s position as the ‘go to’ MENA location for foreign companies looking to establish a regional presence.
Related to this, one of the biggest trends for 2021, in the UAE in particular, is likely to be wholesale corporate restructuring amongst multi-nationals already present here as they look to realign and take advantage of the new rules emerging in the first quarter.
Consolidation inclination
This will most likely see a consolidation of sites and trade licenses and a flight to value, with the winners being those jurisdictions – emirates or free zones – who appreciate this and can offer something more than an office or warehouse lease.
A look at 2021 wouldn’t be complete without considering the importance of Expo 2020 Dubai as a vital celebration of the UAE in its golden jubilee year. The Middle East’s first ever mega-event moment in the sun and, by October 2021 I hope, the global lodestar for post-Covid 19 recovery.
Whilst Expo isn’t a trade show, it’s still the ultimate forum for countries to showcase their best features–technology, culture, innovation, ecology and more -so expect this to be done with fervent pride, and for the UAE to benefit as the host of an event that’s now even more important than was originally intended.
BOX OUT:
Joe Hepworth
Director, OCO Global, and Founder, The British Centres for Business (BCB)
With responsibilities across all market sectors and multiple regional countries, Joe oversees trade and export support projects across the region and is responsible for delivering the company’s investment attraction services in the region. He also leads the company’s economic development consulting team for the GCC.
As part of Joe’s work with OCO, he holds a number of other important client representational roles in the Middle East. He is Director for Missouri Department of Economic Development in the Middle East; Regional Director for IDA Ireland; Middle East Director for the Connected Places Catapult and has managed the UK’s Department of International Trade regional delivery contract since 2013.
