FEMISE Research Paper – FDI in MENA: Impact of political and trade liberalisation process
January 15, 2018
This study focuses on FDI in Middle East and North African countries (MENA). To this end, we use data for greenfield investments from FDI Markets that contains information about the number and volume of projects by source and destination countries all over the world for the period 2003-2012.
In a first step, we provide a comprehensive outlook of the nature and trend of FDI flowing to MENA. In a second step, we estimate a gravity equation to explain greenfield investments for 160 countries. Thirdly, we investigate the role of institutional quality as pull determinants of GI.
According to our study, improving institutional quality is more likely to foster FDI in MENA oil producers than in MENA no oil producers while the presence of natural resources could be expected to undermine the positive impact of institutions’ quality could have on FDI. This may be explained by the fact that the oil production of such MENA countries is so high and their dependence on FDI so low that governments have not developed special ties with MNEs while in other countries abundant in natural resources, non- democratic governments have given special treatment to foreign investors.