FDI inflows fall due to real estate slowdown

UNCTAD report shows declining trend
in FDIs over past three years

Foreign direct investment (FDI) was $3.2 billion in 2011, equal to 8.2 percent of GDP, as per the latest data released by UNCTAD. FDI inflows in 2010 and 2009 by contrast were $4.3 and $4.8 billion respectively.

UNCTAD’s World Investment Report 2012, published July 5, said Lebanon was the fourth largest FDI recipient among 13 economies in West Asia, just behind Saudi Arabia, Turkey, and the UAE. FDI Inflows to the West Asia region decreased by 16 percent in 2011 to $49 billion, their lowest level since 2005 when inflows totaled $44 billion.

Lebanon maintained tenth place on the ‘UNCTAD FDI Attraction Index’, which measures the success of economies in attracting FDIs. China came in first place. The World Bank had estimated that FDI inflows into the country would drop to $3.9 billion in 2011 due to regional political instabilities.

FDI stock in Lebanon totaled $40.6 billion in 2011, up from $37 billion at end-2010.
UNCTAD attributed the drop in inflows to the slowdown in the real estate market: “Flows were affected by the slowdown in the real estate sector - the most important recipient of FDI- as a consequence of adverse spillovers of both the global financial crisis and the regional unrest.”

In 2009, 44 percent of FDI inflows went in to real estate. Roger Melki, senior economist and advisor to the Ministry of Economy, said that non-resident investors are mostly attracted to projects which generate high profits and allow them to pull out quickly.

“With its rising prices, good and stable demand, real estate development obviously gives a high Return on Investment (RoI), at the same time it allows investors to sell their stake at anytime,” said Melki.

The property market has been witnessing a slowdown for the last two years. Both the number and the value of transactions in 2011 fell by around 12 and seven percent respectively compared to the previous year.

Reported by Hanadi Chami