Billions Flowing Into UAE As Investors Liquidate Foreign Funds

by Lorys Charalambous, Tax-News.com, Cyprus

19 August 2003

Investors in the UAE are increasingly choosing to repatriate foreign funds in a trend that has seen billions of dollars flow back to the country in the last couple of years, taking advantage of what is perceived to be a more stable political climate in the region.

According to Gulf News, the nation's 47 banks have reported an increase in deposits of more than $7 billion during last year and the first quarter of this year, from $49.8 billion at the end of 2001 to $57.3 billion by March 2003. The Central Bank has reported that most of this increase has been accounted for by residents' deposits which grew from $47 billion to $54.1 billion. Similar increases have also been recorded in deposits by individuals and businesses

"I believe the increase is because UAE depositors abroad are bringing back their money to benefit from a better business and political atmosphere here and the return of stability and security to the region," observes Jamal Ajjaj, an economist and stockbroker.

"Another factor is that there is concern by those investors about their funds abroad because of persistent volatility in the markets and threats or measures taken by some Western countries against Arab funds following the suicide bombings in the US," Ajjaj adds.

Oddly, this inflow of repatriated capital has occured whilst domestic interest rates have fallen to an historic low of 1%. However, many have been attracted by real estate and equity returns of anything from 5% to 15%.

"The reason for the return of overseas funds into banks is that some investors are simply bringing back their money so they can use it to buy shares or invest in other fields," Mohammed Yassin, director of stockbroker the Emirates Commercial Centre, informed Gulf News.

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