Domestic Economy

UN: Iran Sanctions Relief Key to “Rebooting” Region

UN: Iran Sanctions Relief Key to “Rebooting” RegionUN: Iran Sanctions Relief Key to “Rebooting” Region

The removal of sanctions on Iran and stronger global growth are needed to attract more foreign direct investment to the region, which fell last year for the sixth year in a row, a senior UN official said.

Foreign direct investment to countries in West Asia fell 4% to $43 billion in 2014 from a year earlier, owing to regional conflicts and repercussions of the global financial crisis, according to the United Nations Conference on Trade and Development.

West Asia’s share of global FDI was 3.5% last year, Abu Dhabi-based English daily The National reported.

"Harvesting peace and economic inclusion of Iran are important levers for the recovery and rebooting of the Middle East as an exciting destination for investment,” said Mukhisa Kituyi, secretary-general of UNCTAD.

“The opportunities of reconstructing and unleashing the economy of Iran, for example, are phenomenal.”

Kituyi said the UAE’s economy, for example, could reap $13 billion from the lifting of sanctions on Iran, as trade between the two countries rises between now and 2018, according to IMF forecasts.

That is equivalent to a 1% gain in real GDP growth each year over the next three years, according to IMF’s annual report on the UAE economy.

In 2013, Iran accounted for 12% of the UAE’s non-oil exports, valued at $12 billion that year. Most of this came in the form of reexports traded through Dubai’s Jebel Ali Port.

The UNCTAD chief said another hurdle to increasing FDI flows into the region is global growth.

Growth across the world is set to weaken, with the IMF for the second time this year trimming its forecast to 3.1% owing to the slowdown in China and weaker commodity prices. The global economy, which grew 3.4% last year, is set to rebound to 3.6% next year, according to the IMF forecasts.

"The global recovery gaining momentum will have a trigger effect and vibrancy even in the Middle East as a destination of value-added services and component manufacturing,” said Kituyi.

The slowing global growth is taking place at a time when world trade is growing slower than global GDP for the first time since the Second World War.

The World Trade Organization has revised down its forecast for global trade growth to 2.8% this year, the fourth consecutive year with trade growth below 3%.