The World Investment Report, published in June 2014 by the United Nations Conference on Trade and Development (UNCTAD), came as no surprise to the Middle East. Most of the countries there have not sustainably regained the pace of growth in their foreign direct investment (FDI) and failed to recover for the fifth consecutive year. This is due to political tensions all across the region and the fog they create over the investment environment, holding back investors.

One of the causes of the regression, despite the global upward trend, is the lack of economic integration among Middle Eastern countries and the persistence of trade and tariff barriers.

FDI into Western Asia decreased by 9% in 2013, even though it increased in countries like Iraq and the United Arab Emirates by 20% and 9% respectively. This is not surprising since the UAE has been recovering quickly after its 2009 debt crisis. Iraq had, until the beginning of this year, attracted a significant amount of investment, especially in the country’s private oil sector. In addition, all the indexes of expected growth and oil production helped boost investors’ confidence.

One unpleasant surprise was the severe shrinking of Lebanon’s FDI by 23%. Lebanon, like the rest of the countries in the Middle East and North Africa, was one of the biggest attractors of global foreign investment between 2006 and 2012. This was mainly due to its free economic system, tax climate, the durability and quality of its banking system and the fact that it kept attracting investment despite political instability. For example, in 2012 investments increased by 8.5% in spite of the political crisis that blocked broader economic growth. The country benefited from two further attractive factors. The first was that before the Syrian crisis, let alone the whole Arab Spring revolution, Lebanon took advantage of the opportunity to create a safe haven for Arab investment. The second factor was that international oil companies turned their attention toward Lebanon after verifying that its sea holds a wealth of oil and gas. More than 30 companies, including ExxonMobil, Rosneft and Mubadala Petroleum, expressed interest in exploratory drilling early last year.