US Election 2024: Potential Effects on Foreign Investment in the UAE

Robin Philip
November 6, 2024

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The U.S. election 2024 is a significant event for Americans as well as for global markets. It is poised to have a direct impact on foreign policy, and foreign investment in the UAE. As the world closely watched the fiercely competitive race between Former President Donald Trump and Vice President Kamala Harris, this election is set to impact the global economic scenario with a precise effect on geopolitical stability.

For UAE investors, the US election 2024 may redefine international relations between the U.S. and the UAE. Let’s explore the potential implications that the elections will have on foreign direct investment in UAE.

Impact of US Election 2024 on Foreign Direct Investment in the UAE

FDI is typically the sum of equity capital, reinvestment of earnings, and other capital that makes up the direct investment equity flows in the economy. According to the recent World Investment Report 2024, the UAE has ranked 2nd globally (after the U.S.) in the FDI inflows recorded at USD 30.688 bn in 2023 as compared to USD 22.737 bn in 2022.

Subsequently, it is actively incentivizing new economic sectors – driven by non-oil and digital transformation including fintech, eCommerce, agritech, health care, education, tourism, logistics, manufacturing, medical tourism and many among others.

As stated in a recent announcement by Vice President and Prime Minister and Dubai Ruler Sheikh Mohammed bin Rashid Al Maktoum, the UAE projects to become a global strategic investment hub in the near future. It has launched a national investment strategy to target a 3X increase in FDI to reach AED 2.2 Tn i.e. USD 599 Bn by 2031. The government will focus on attracting FDI in priority sectors as well as existing projects to promote the UAE’s global positioning.

Impact of U.S. election on UAE

The U.S. foreign policy has a direct influence on the investment inflows in the Middle East. Owing to the fact that the UAE is recognised as the key hub for American and other international investors. Each candidate has a different approach towards Middle Eastern diplomacy as Trump’s trade policies are aimed at protecting the U.S., followed by high tariffs. This could disrupt the global supply chain, impacting companies that are heavily dependent on Chinese and European imports.

On the other hand, Kamala Harris’s approach focused on corporate tax reforms, increasing the rate from 21% to 28% in addition to tax credit benefits proposed to stimulate growth for small businesses. Hence, the role of each candidate in the U.S. region can directly influence investment sentiments. If the new administration moves in support of the UAE’s strategy, this could bolster investments in sectors like real estate, energy, and technology.

Influence on the tech and trade

In recent years, the UAE has positioned itself as a technology hub globally. This has attracted American investors, especially those who are enthusiastic about Artificial Intelligence (AI), FinTech, EdTech, and similar technologies. As the UAE continues to introduce strict data privacy laws and cybersecurity reforms, investors from the U.S. will feel encouraged and consider the UAE as a preferred destination for investments.

Apart from this, the U.S. election 2024 will have a profound impact on the investment treaties between both countries. It will play an instrumental role in facilitating and protecting the investments on a macro level. Hence, the election results decide which administration strengthens both of their ties and creates more favourable conditions to provide a secure environment for reducing trade barriers.

Conclusion

With a core focus on protecting American interests, the election will open a new chapter in trade agreements. Ultimately, this will bolster the UAE’s positioning as a profitable destination for investors, especially American investors seeking to invest in free zones. As a result, this will significantly increase the number of entrepreneurs and investors planning for business setup in UAE, eventually creating a need for reliable business consultants in UAE.