Arab countries attracted around $9
billion in private capital flows in
1999, or 6% of total capital flows
to the emerging markets that year. Private
flows to the Arab region are expected to rise
by l 7% to around $10.5 billion in 2000,
however, growth in global private capital
flows is forecast at 30%, translating into a
lower share of 5 .4% for the Arab countries.
After declining in 1997 for the first time
this decade, private capital flows to
emerging markets fell dramatically in
1998 by over 44%, with much of the
decline in the wake of the Far East crisis.
Notwithstanding a rally in emerging markets
early in 1999, external financing for
many emerging market borrowers
remained weak with net private capital
flows rising marginally to $148.7 billion
lflst year, or by 0.6% on their 1998 level of
$147.8 billion. While p1ivate capital flows
in 2000 are projected to remain below the
average level achieved over the last five
years, it is evident that market participants
are beginning to place the financial crises
of the last few years behind them, with net
private capital flows expected to rise to
$193 billion this year.
According to the I’nstitute of
International Finance, foreign direct
investment (FDI) into emerging market
economies rose to a record $139 billion in
1999 (94% of total private capital flows),
after $118 billion in 1998, but is expected
to retreat to $120 billion this year, largely
reflecting lower flows to Latin America.
Most emerging stock markets performed
well in 1999, particularly towards the end
of the year, and a rise in portfolio equity
investments into emerging stock markets
is anticipated this year with the volume of
investments rising to $34 billion from
$17 billion in 1999 and $13. 7 billion the year before. Around $1.8 billion or less
than 5% of total portfolio equity investments
into emerging markets are forecast
to go to the Arab stock markets this year,
compared to $1.5 billion in 1999.
FDI flows to the Arab countries are
expected to reach $5.2 billion in 2000,
from $4.5 billion in 1999. Although the
share of Arab countries in global FDI is set
to rise from 3.6% in 1999 to an estimated
4.6% in 2000, it remains very low.
However, the announced intentions of
several Gulf countries to open up their
energy sectors to foreign participation,
alongside economic reform and liberalization
policies across the region and a
stronger privatization drive in some Arab
countries will help boost the Arab world’s
share of global FDI flows. Furthermore, a
clear progress in the peace negotiations
between Israel and Syria will reduce
regional risk and enhance the attraction of
the region to foreign direct investment.
Net private credit flows (including
bank Joans and bond issuance) to emerging
countries is expected to rise to about
$40 billion this year, after a net credit outflow
of $7 billion in 1999. Bank credits to
emerging markets this year are expected
to be slightly negative at a $3.1 billion outflow.
This follows a rush out of emerging
markets by commercial banks (mainly
from East Asia and Russia) in 1998 and
1999 with net credit outflows of $49 billion
and $39 billion respectively. Bond
issuance by major emerging market borrowers
amounted to $55 billion last year
compar.e4 to $74 billion in 1998 and
$109 billion last year. The recovery in
bond issuance witnessed in the last quarter
of 1999 as investor appetite for
emerging market paper returned and
spreads fell significantly, is likely to continue
this year with bonds issued in the
international market by Arab governments
and corporates forecast to reach
$2.5 billion in 2000 compared to $2.3
billion the year before.
