UAE Powers GCC Foreign Investment to New $60B Milestone

GCC markets have hit a new record as foreign capital inflows reached $60 billion, up by a lot from $30 billion in March 2022. The region’s financial markets showed impressive growth in February 2025 and attracted $2.47 billion in foreign investments. This amount surpasses January 2025’s $939 million and stands well above the $890 million recorded last year. The United Arab Emirates leads the pack with $2.47 billion in total inflows. Saudi Arabia and Kuwait added $352 million and $304 million to the mix. These strong investment numbers highlight GCC’s appeal as a top investment destination, and UAE continues to dominate as the preferred market for international capital.

UAE Attracts Record $2.47B Foreign Investment in February

The UAE has emerged as a global investment powerhouse. The country drew AED 112.7 billion in foreign direct investment during 2023. This is a big deal as it means that investments grew by 35% from the previous year. The UAE also managed to keep its position as the top investment destination in the Middle East and West Asia regions.

UAE’s success story continued as it claimed the second spot worldwide for new foreign direct investment projects in 2023. The country announced 1,323 greenfield projects, showing a 32.7% growth from 997 projects in 2022. International investors clearly see the UAE as an attractive destination.

By the end of 2023, the total foreign direct investments in the UAE reached AED 825.8 billion, with a strong 15.8% growth. The World Investment Report 2024 revealed that UAE’s FDI inflows reached USD 30.688 billion in 2023, up from USD 22.737 billion in 2022.

Dubai led the emirates with FDI capital inflows of USD 6.81 billion. Abu Dhabi, while hosting just 13% of total UAE projects, pulled in USD 4.48 billion. Abu Dhabi showed its strength in attracting major investments with eight projects worth over USD 200 million, while Dubai had five such projects.

Several strategic initiatives power UAE’s investment success:

• NextGenFDI: A shared program between government and private entities that speeds up licensing for technology companies
• Full ownership opportunities for foreign investors in sectors of all types
• Strategic focus on knowledge and digital economy sectors

The Ministry of Economy highlighted promising investment sectors including fintech, e-commerce, healthcare, education, tourism, space, logistics services, and renewable energy. These sectors line up with UAE’s vision of economic diversification and technological advancement.

The country’s steadfast dedication to encouraging international investment shows in the roughly 112 agreements signed with trading partners to protect and encourage investments. This reliable framework, combined with the country’s strategic location and innovative technology, strengthens its position as a leading global investment destination.

How Index Inclusions Drive GCC Market Growth

GCC financial markets have experienced remarkable growth through index inclusion. The region’s share in the MSCI Emerging Markets Index has grown from 1.5% in 2014 to 6.5% by mid-2024. This growth includes 72 stocks with a market capitalization of over AED 1799.25 billion.

Saudi Arabia leads with a 4.4% weightage as of February 2024. The United Arab Emirates follows at 1.3%, Qatar at 0.9%, and Kuwait at 0.8%. Large-cap listed companies have raised their foreign ownership limits, which made them eligible for inclusion or higher weightage in global indices.

Index inclusion has significantly boosted market performance. UAE and Qatar’s upgrade to MSCI EM index in 2014 attracted net foreign inflows of USD 300 million and USD 2,482 million respectively. Their market indices outperformed other GCC countries. Dubai’s market rose 245%, Abu Dhabi 111%, and Qatar 65%.

The region’s progress caught FTSE Russell’s attention. Saudi Arabia’s inclusion in the FTSE Emerging Index brought in USD 5.5 billion. Kuwait’s promotion to Secondary Emerging Market status attracted passive inflows of about USD 800 million.

Global investors find GCC equities attractive due to their low correlation with developed and emerging markets. The region’s sector mix is different from technology-heavy global markets. The financial sector dominates with over 50% of the GCC’s weight in the MSCI EM index.

The GCC’s investment appeal comes from:

• Dollar-pegged currencies that reduce currency risk
• Economic reforms and better market systems
• New exchange-traded funds for GCC equities and bonds

In spite of that, some challenges remain. UAE’s turnover ratio improved from 38% to 75% and Qatar’s from 13% to 24% in 2014, but this boost in liquidity was temporary. Market interest now depends on ongoing reforms, better corporate announcements, new listings, and investment products to maintain steady liquidity levels.

Global Investors Shift Focus from Emerging Markets

The GCC has become a top choice for investors worldwide, especially as emerging markets continue to evolve. GCC states have shown remarkable economic strength, and their growth will reach 3.7% in 2024. This is a big deal as it means that the growth exceeds the global average of 2.9%.

Trade patterns tell an interesting story. Asia now receives more than 70% of all GCC oil and gas exports, with China taking 20%. India has risen to become the world’s second-largest crude oil net importer after China. Its imports have grown by 36% in just a decade.

Financial markets in the region have remained exceptionally stable during global uncertainty. GCC bonds match US bonds in performance, while GCC equities do better than US equities when markets are risk-averse. When global markets turn cautious, GCC stocks consistently outperform US stocks by 0.8 percentage points on average.

The UAE stands out as a magnet for wealthy individuals worldwide. More than 6,700 millionaires are expected to move there in 2024. This popularity comes from:

• Strong economic outlook with GDP growth of 3.9% and 4.1% for 2024 and 2025 respectively
• Perfect location as a bridge between East and West
• Tax benefits with no income, capital gains, or inheritance taxes

The GCC’s appeal goes beyond traditional areas. The New Development Bank has committed over AED 260.71 billion to infrastructure, public health, and clean energy projects. Western banks and financial institutions are expanding their GCC presence while reducing operations elsewhere.

Saudi Arabia has caught the attention of global financial giants. Goldman Sachs got approval to open in Riyadh in May 2024. BlackRock, the Edmond de Rothschild Group, and Deutsche Bank are following suit. These moves match the kingdom’s rule that foreign companies must set up regional offices locally to work on government contracts.

The GCC markets have reached a pivotal moment in their history. Foreign capital inflows have hit a record $60 billion. The UAE showcases this momentum by pulling in $2.47 billion in February 2025. Global investors now recognize the region’s strength through strategic index inclusions. GCC markets’ share in the MSCI Emerging Markets Index has grown substantially from 1.5% to 6.5% in the last decade.

The region’s economy remains resilient with a projected growth rate of 3.7% for 2024, which beats global averages. The strong trade bonds with Asia, especially China and India, have created more market stability. Saudi Arabia now emerges as a financial powerhouse, while the UAE attracts wealthy individuals worldwide. These developments point to lasting growth opportunities.

The GCC’s journey from an oil-dependent region to a thriving investment hub shows its successful economic diversification. Dollar-pegged currencies and ongoing reforms are the foundations of its success. A strong infrastructure continues to draw international capital steadily. These elements set up GCC markets for continued expansion, supported by solid fundamentals and key advantages in the global financial world.