According to a recent study, the UAE has emerged as one of the top destinations for global capital flows, reflecting significant changes in the global economic landscape.
The report, titled “A New Era of Capital Flows in a Polycentric World,” highlights the UAE’s growing appeal for foreign investments. It emphasizes how political stability, favorable exchange rates, and strong financial systems attract global investors.
Alongside the UAE, Singapore and Malaysia are also becoming major hubs for foreign capital due to their market-friendly policies.
Structural Reforms Drive Foreign Investments
The study explains that structural market reforms in the UAE and Singapore have significantly increased foreign direct investment (FDI) inflows. Malaysia, on the other hand, has benefited from robust investments in its services and production sectors, with contributions from countries like Hong Kong, Japan, and the US.
Abu Dhabi: The ‘Capital of Capital’
Abu Dhabi, often referred to as the ‘Capital of Capital,’ has solidified its position as the world’s wealthiest city, boasting $1.7 trillion in sovereign wealth funds. This underscores the emirate’s central role in global capital flows.
The study, developed by ADQ in collaboration with Abu Dhabi Finance Week and Abu Dhabi Global Market, also received academic input from NYU Abu Dhabi’s Stern faculty.
Shifting Patterns in Global Capital Flows
The report identifies a shift in how global capital flows are being distributed. It notes that while global factors like liquidity and market volatility have traditionally driven investments, domestic factors—such as economic growth, trade openness, and investor confidence—are now playing a larger role.
Previously, the UAE focused on investing its economic surpluses abroad. However, the country is now prioritizing domestic investments. As part of this strategy, the UAE aims to double its cumulative FDI to Dh1.3 trillion and reach a total FDI balance of $600 billion by 2031.
UAE’s Dual Role in Global Investments
According to Mohammed Al Hawi, Undersecretary of the UAE Ministry of Investment, the UAE serves as both an importer and exporter of capital. The country has diversified its investment sources, encouraging a mix of greenfield and mergers and acquisitions (M&A) investments across various sectors.
Sovereign Wealth Funds on the Rise
The study also highlights the growing role of sovereign wealth funds (SWFs) in global capital markets. Over the last two decades, the number of recognized SWFs has risen to 176, with their combined assets exceeding $12 trillion—double the figure from 20 years ago.
The report points out that most new SWFs originate from emerging markets, with countries like the US and UK also exploring plans to establish their own funds.
